Chrysler 2010 Annual Report Download - page 191

FIAT GROUP
CONSOLIDATED
FINANCIAL
STATEMENTS
AT 31 DECEMBER
2010
NOTES
190
Goodwill, trademarks and intangible assets with indefinite useful lives
Goodwill is allocated to the Group’s cash-generating units (“CGUs”) identified as the Group’s operating sectors. The following table presents the allocation
of goodwill across the sectors:
At 31 December 2010 At 31 December 2009
Continuing Discontinued
(€ million) Operations Operations Total Total
Agricultural and Construction Equipment - 1,794 1,794 1,662
Ferrari 786 - 786 786
Production Systems 135 - 135 125
Components 121 - 121 118
Trucks and Commercial Vehicles - 52 52 56
Metallurgical Products 18 - 18 18
Fiat Group Automobiles 18 - 18 10
Fiat Powertrain 2 - 2 1
FPT Industrial - 2 2 -
Goodwill net carrying amount 1,080 1,848 2,928 2,776
At 31 December 2010 Trademarks and Other intangible assets with indefinite useful lives included in Discontinued Operations, attributable for €174 million
to the Agricultural and Construction equipment sector, consisted of acquired trademarks and similar rights which have no legal, contractual, competitive or
economic that limits their useful lives. For the purposes of impairment testing, these assets were attributed to the respective cash-generating units without
the need for any recognition of impairment.
Goodwill classified as Continuing Operations
The vast majority of goodwill classified as Continuing Operations, representing approximately 85% of the total classified as Continuing Operations,
is allocated to cash-generating units in the Ferrari and Production Systems sectors.
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, for Ferrari, the cash generating unit corresponds to the sector as a whole, while in Comau goodwill has been allocated to the System,
Pico and Service businesses. In those sectors, the cash-generating unit recoverable amount is determined on the basis of their value in use defined as
the discounted value of the expected future operating cash flows resulting from the estimates included in the 2010-2014 strategic plan of the sector,
extrapolated for later years on the basis of medium- to long-term growth rates depending on the detailed nature of the operations and the extent to which
they are differentiated and on the forecasts made by the individual sector to which the cash-generating units belong. These cash flows are then discounted
using rates that take account of current market assessments of the time value of money and the specific risks inherent in individual cash-generating units.
The recoverable amount of the Ferrari and Comau cash-generating units and of the respective goodwill is the value in use and is determined on the basis
of the following assumptions:
2010 2009
Terminal value Discount rate Terminal value Discount rate
growth rate before taxes growth rate before taxes
Ferrari 2% 8.3% 2% 10.4%
Production Systems 2% 9.0% 0% 9.0%
The recoverable amount of the cash generating unit to which the Ferrari sector goodwill relates is significantly higher than its carrying amount; in addition,
the exclusivity of the business, its historical profitability and its future earnings prospects indicate that this carrying amount will continue to be recoverable,
even in the event of economic and market conditions which remain difficult.