Reebok 2009 Annual Report Download - page 183

CONSOLIDATED FINANCIAL STATEMENTS Notes 179
N °-
04
REEBOK PRODUCTOS ESPORTIVOS BRASIL LTDA.’S NET ASSETS AT THE ACQUISITION
DATE
€ IN MILLIONS
Pre-acquisition
carrying
amounts Fair value adjustments
Recognised
values on
acquisition
Inventories 2 — 2
Other current assets 0 — 0
Net assets 2 — 2
Goodwill arising on acquisition —
Purchase price settled in cash 2
Cash and cash equivalents acquired —
Cash outflow on acquisition 2
Pre-acquisition carrying amounts were based on applicable IFRS standards.
If this acquisition had occurred on January 1, 2008, total Group net sales would have been
€ 10.8 billion and net income would have been € 641 million for the year ending December 31, 2008.
The acquired subsidiary contributed € 6 million to the Group’s net income for the period from
April to December 2008.
Effective September 5, 2008, adidas International, Inc. acquired 100% of the shares of Tex-
tronics, Inc. for a purchase price in the amount of US $ 35 million. Based in Wilmington/Delaware
(USA), Textronics, Inc. is a specialist in the development of wearable sensors for use in fitness and
health monitoring.
The acquisition had the following effect on the Group’s assets and liabilities:
N °-
04
TEXTRONICS, INC.’S NET ASSETS AT THE ACQUISITION DATE
€ IN MILLIONS
Pre-acquisition
carrying
amounts Fair value adjustments
Recognised
values on
acquisition
Cash and cash equivalents 0 — 0
Inventories 0 — 0
Other current assets 0 — 0
Property, plant and equipment, net 0 — 0
Trademarks and other intangible assets, net — 9 9
Deferred tax assets — 3 3
Accounts payable (0) — (0)
Other current liabilities (0) — (0)
Deferred tax liabilities — (3) (3)
Net assets 0 9 9
Goodwill arising on acquisition 16
Purchase price settled in cash 25
Cash and cash equivalents acquired 0
Cash outflow on acquisition 25
Pre-acquisition carrying amounts were based on applicable IFRS standards.
The following valuation methods for the acquired assets were applied:
Trademarks and other intangible assets: The “relief-from-royalty method” was applied for
trademarks/trade names. The fair value was determined by discounting the royalty savings after
tax and adding a tax amortisation benefit, resulting from the amortisation of the acquired asset.
For the valuation of core technology, the “multi-period-excess-earnings method” was used. The
respective future excess cash flows were identified and adjusted in order to eliminate all elements
not associated with these assets. Future cash flows were measured on the basis of the expected
sales by deducting variable and sales-related imputed costs for the use of contributory assets.
Subsequently, the outcome was discounted using the appropriate discount rate and adding a
tax amortisation benefit. The “income approach” was applied for covenants not-to-compete by
comparing the estimated prospective cash flows with and without the agreements in place. The
value of the covenants not-to-compete is the difference between these discounted cash flows
being discounted to present value at the appropriate discount rate.
The excess of the acquisition cost paid versus the net of the amounts of the fair values
assigned to all assets acquired and liabilities assumed, taking into consideration the respective
deferred taxes, was recognised as goodwill. Any acquired asset that did not meet the identification
and recognition criteria for an asset was included in the amount recognised as goodwill.
The goodwill arising on this acquisition was allocated to the cash-generating unit adidas at
the time of the acquisition. As part of the Group’s reorganisation in the second half of 2009, it has
been reallocated and is denominated in the local functional currency see also Note 2.
If this acquisition had occurred on January 1, 2008, total Group net sales would have been
€ 10.8 billion and net income would have been € 640 million for the year ending December 31, 2008.
The acquired subsidiary contributed net losses of € 1 million to the Group’s net income for
the period from September to December 2008.
Effective November 20, 2008, as a result of a takeover bid, Taylor Made Golf Co., Inc. acquired
100% of the shares of Ashworth, Inc., including all direct and indirect holdings for a purchase
price of US $ 30 million. Based in Carlsbad/California (USA), Ashworth is a well-established golf
lifestyle apparel brand.