Porsche 2009 Annual Report Download - page 154

154 Financials
To determine whether goodwill which was allocated to the former Volkswagen subgroup is
impaired, a calculation based on value in use was applied. The calculation was based on a current
forecast prepared by management including their assumptions about growth and the average EBIT
margin, covering a period of five years. It took into account the existing uncertainty about the ef-
fects of the financial crisis on the automotive sector and a recovery within the planning period. To
calculate the terminal value, the cash flow was extrapolated taking into account the expected
growth rates and profitability. The calculation in the prior year was based on a discount rate of 7.6%
and a growth rate of 1.0%. The growth rate was based on the circumstances specific to the indus-
try and considered the specific price and cost situation. The discount rate was determined on the
basis of the weighted capital costs of a peer group of listed automotive companies with a similar
risk structure. Even omitting growth when calculating the terminal value or a reduction of the EBIT
margin applied by 15% would not have led to an impairment of the goodwill.
The impairment testing of the goodwill allocated to the former Porsche subgroup was ba-
sed on fair value less costs to sell. The calculation was based on the value of Porsche AG as a
whole stated in the basic agreement of €12.4 billion. This figure served as the best indicator of fair
value.
In the prior year the impairment test of recognized brands in the consolidated financial sta-
tements of Porsche SE was also based on fair value less costs to sell. The calculations were made
by applying the relief from royalty method (brand equity approach) using a planning period of five
years and an assumed growth rate of 0.75%. This growth rate was again based on the circum-
stances specific to the industry and the specific price and cost situation. The sensitivity analysis
showed that even without assuming growth in the terminal value, the brand values were not im-
paired.
The assumptions described above were adjusted to reflect the current information available
taking appropriate assumptions on macro-economic trends as well as historical developments into
account.
When determining the value in use for the impairment test of other intangible assets and
property, plant and equipment, local discount rates of at least 8.7% to 9.8% were used.
Investment property
Investment property held to generate rental income is accounted for at depreciated cost.
The underlying useful lives and depreciation methods used in subsequent measurement correspond
to those applied for items of property, plant and equipment used by the group. Due to the meas-
urement at depreciated cost, the fair values of the investment property must be disclosed in the
notes to the consolidated financial statements. An income capitalization approach is used to calcu-
late the fair value of each building by determining the income value based on gross income taking
other factors such as land value, remaining useful lives and a multiplier specific to residential prop-
erty into account. Internal group calculations take account of market information.