Reebok 2007 Annual Report Download - page 171

167
ANNUAL REPORT 2007 --- adidas Group
 11 GOODWILL Goodwill primarily relates to the Group’s acquisitions of the Reebok business
as well as the previous acquisition of subsidiaries in the United States, Australia / New Zealand,
Netherlands / Belgium and Italy.
GOODWILL
€
in million
s
D
ec.
3
1 Dec. 31
2007 2006
Goodwill, gross
Less: impairment
Goodwill
,
ne
t
1,436 1,516
—
—
1
,
4
3
6 1
,
51
6
The majority of goodwill which primarily relates to the acquisition of the Reebok business in
2006 is denominated in US dollars. A negative currency translation effect of € 80 million and
€ 88 million was recorded for the years ending December 31, 2007 and 2006, respectively.
From January 1, 2005, goodwill is tested annually for impairment. There was no impairment
expense for the years ending December 31, 2007 and 2006. The Group determines whether
goodwill impairment is necessary 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 goodwill is allocated.
Estimating the fair value less costs to sell requires the Group to make an estimate of the
expected future cash fl ows from the cash-generating unit and also to choose a suitable discount
rate in order to calculate the present value of those cash fl ows.
Future changes in expected cash fl ows 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)
 12 TRADEMARKS AND OTHER INTANGIBLE ASSETS Trademarks and other intangible assets
consist of the following:
TRADEMARKS AND OTHER INTANGIBLE ASSETS
€ in million
s
Dec. 3
1
Dec. 31
2007
2006
Trademarks, gross
Less: accumulated amortization
T
ra
d
emar
k
s, ne
t
Software, patents and concessions, gross
Less: accumulated amortization
O
ther intangible assets, ne
t
Trademarks and other intan
g
ible assets, ne
t
1
,
291 1,454
—
—
4
1
,
291 1
,
45
4
441
447
247
224
19
4
2
2
3
7
1
,
485 1
,
67
7
Intangible asset amortization expenses were € 64 million and € 69 million for the years ending
December 31, 2007 and 2006, respectively.  see also Note 24
At December 31, 2007, trademarks related to the Reebok acquisition with indefi nite useful
lives amounted to € 1.285 billion (December 31, 2006: € 1.436 billion). They were estimated to
be indefi nite due to the high degree of brand recognition as well as their long standing heritage.
The trademarks are allocated to the cash-generating unit Reebok.
The Group determines whether trademarks with indefi nite useful life 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-specifi c sales and appro-
priate arm’s length royalty rates from the cash-generating unit and also to choose a suitable dis-
count rate in order to calculate the present value of those cash fl ows. There was no impairment
expense for the years ending December 31, 2007 and 2006.
Future changes in expected cash fl ows 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)
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