Reebok 2006 Annual Report Download - page 163

› Notes to the Consolidated Balance SheetNotes ›159
12 » Goodwill
Goodwill primarily relates to the Group’s acquisitions of the Reebok business as well as of
subsidiaries in the United States, Australia/New Zealand, Netherlands/Belgium and Italy.
The increase in goodwill relates to the acquisition of the Reebok business. The main part
of this goodwill is denominated in US dollars. The currency translation effect was negative
€ 88 million.
From January 1, 2005, goodwill is tested annually for impairment. There was no
impairment expense for the years ending December 31, 2006 and 2005. The Group determines
whether goodwill impairment is necessary at least on an annual basis. This requires an esti-
mation of the fair value less costs to sell of the cash-generating units to which the goodwill is
allocated. Estimating the fair value less costs to sell requires the Group to make an estimate
of the expected future cash flows from the cash-generating unit and also to choose a suitable
discount rate in order to calculate the present value of those cash flows.
Future changes in expected cash flows and discount rates may lead to impairments of the
accounted goodwill in the future.
For details see Statement of Movements of Tangible and Intangible Assets and Financial
Assets (Attachment I to these Notes).
13 » Trademarks and Other Intangible Assets
Trademarks and other intangible assets consist of the following:
Intangible asset amortization expenses (continuing operations) were € 69 million and € 34 mil-
lion for the years ending December 31, 2006 and 2005, respectively (see also Note 25).
Trademarks with indefinite useful lives amount to € 1.436 billion. They were estimated to
be indefinite due to the high degree of brand recognition as well as their foundation a long time
ago. The trademarks are allocated to the cash-generating unit Reebok.
The Group determines whether trademarks with indefinite useful lives are impaired at
least on an annual basis. This requires an estimation of the fair value less costs to sell of the
cash-generating units to which the trademark is allocated. Estimating the fair value less costs
to sell requires the Group to make an estimate of the expected future brand-specific sales
and appropriate arm’s length royalty rates from the cash-generating unit and also to choose a
suitable discount rate in order to calculate the present value of those cash flows. There was no
impairment expense for the year ending December 31, 2006.
Future changes in expected cash flows and discount rates may lead to impairments of the
accounted trademarks in the future.
For details see Statement of Movements of Tangible and Intangible Assets and Financial
Assets (Attachment I to these Notes).
Trademarks and Other Intangible Assets € in millions
Dec. 31 Dec. 31
2006 2005
Trademarks, gross 1,454 15
Less: accumulated amortization 0 0
Trademarks, net 1,454 15
Software, patents and concessions, gross 447 242
Less: accumulated amortization 224 166
Other intangible assets, net 223 76
Trademarks and other intangible assets, net 1,677 91
Goodwill € in millions
Dec. 31 Dec. 31
2006 2005
Goodwill, gross 1,516 436
Less: impairment — —
Goodwill, net 1,516 436