Chrysler 2008 Annual Report Download - page 141

At 31 December 2008 Trademarks and other intangible assets with indefinite useful lives, attributable for €167 million (€158 million
at 31 December 2007) to the CNH – Case New Holland, consist of trademarks and similar rights from which, based on the
competitive environment, the Group expects to be able to obtain a positive contribution to its cash flows for an indefinite period of
time. For the purposes of impairment testing, those assets were attributed to the respective cash-generating units without the need
for any recognition of impairment.
In particular the vast majority of goodwill, representing approximately 93% of the total, is allocated to cash-generating units in the
Agricultural and Construction equipment, Ferrari and Comau Sectors. The cash-generating units considered for the testing of the
recoverability of the goodwill are generally the product lines of the Sectors themselves.
The recoverable amount of the cash-generating units to which goodwill and other intangible assets with an indefinite useful life
have been allocated is determined on the basis of their value in use, defined as the discounted value of the expected future
operating cash flows at a rate of return that incorporates the risks associated with the particular cash-generating units as of the
valuation date. The discounted cash flows approach is dependent on several critical management assumptions, including estimates
of future sales growth, gross margins, operating costs, terminal value growth rates, capital expenditures, changes in working
capital requirements and the weighted average cost of capital (discount rate). More in particular:
In the CNH – Case New Holland Sector, the cash generating units to which goodwill has been allocated consist of the different
brands (CaseIH and New Holland for agricultural equipment, Case and New Holland Construction for construction equipment and
financial services). More in particular:
Amount allocated to goodwill
(€ millions) at 31 December 2008
Agricultural equipment 1,217
Construction equipment 397
Financial services 85
Total 1,699
To determine the recoverable amount of these cash-generating units, the CNH Sector relied on discounted cash flows and, as a
further method, on market multiples.
Under the discounted cash flow approach the Sector used the following assumptions:
2008 2007
Terminal value Discount rate Terminal value Discount rate
growth rate before taxes growth rate before taxes
Agricultural equipment 1% 16.1%-17.5% 2% 11.8%-12.5%
Construction equipment 2% 14.3%-15.8% 2% 12.5%-15.1%
Cash flow projections were based on the 2009 budget and the business plan for 2010-2011; for the period 2012-2015, growth rates
of 1-2.5% were assumed. Terminal values were calculated using the growth rates provided in the table above.
Revenue and EBITDA market multiples were utilised in determining the fair value of Case IH and New Holland for agricultural
equipment cash-generating unit and Case and New Holland Construction for construction equipment cash-generating unit while
book value and total asset market multiples were utilised in determining the fair value of the Financial Services cash-generating
unit.
Fiat Group Consolidated Financial Statements at 31 December 2008140