Reebok 2015 Annual Report Download - page 206

CONSOLIDATED FINANCIAL STATEMENTS
Notes
202
4
The goodwill arising on this acquisition was allocated to the groups of cash-generating units of the regional
markets which are responsible for the joint distribution of adidas and Reebok based on the expected
operating/contribution margin synergy potential. The goodwill is not deductible for tax purposes and is
denominated in euro as the local functional currency.
The acquired subsidiary generated net sales in an amount of € 8 million as well as losses in an amount
of € 0 million for the period from August 5 to December 31, 2015. If this acquisition had occurred on
January 1, 2015, total Group net sales would have been € 16.9 billion and net income attributable to
shareholders would have been € 636 million for the year ending December 31, 2015.
Effective January 2, 2015, Reebok International Limited completed the acquisition of Refuel (Brand
Distribution) Limited (‘Refuel’) and consequently owns 100% of the voting rights. Based in London (UK),
Refuel mainly markets and distributes apparel of Mitchell & Ness. With this acquisition, the adidas Group
has taken over all distribution rights of Mitchell & Ness outside of North America. The entire business of
Refuel was acquired for a purchase price of GBP 11 million in cash.
The acquisition had the following effect on the Group’s assets and liabilities, based on a purchase price
allocation:
NETASSETS OF REFUEL BRAND DISTRIBUTION LIMITEDAT THE ACQUISITION DATE
€ in millions Pre-acquisition
carrying amounts
Fair value
adjustments
Recognised values
on acquisition
Cash and cash equivalents 6 – 6
Accounts receivable 2 – 2
Inventories 1 0 2
Property, plant and equipment 0 – 0
Other intangible assets – 7 7
Accounts payable (1) – (1)
Income taxes (0) – (0)
Deferred tax liabilities (0) (1) (1)
Net assets 8 6 14
Goodwill arising on acquisition –
Purchase price settled in cash 14
Less: cash and cash equivalents acquired (6)
Net cash outflow on acquisition 7
The following valuation methods for the acquired assets were applied:
•
Inventories: The ‘pro rata basis valuation’ was applied for estimating the fair value of acquired
inventories. Realised margins were added to the carrying amount of acquired inventories. Subsequently,
the costs for completion for selling, advertising and general administration as well as a reasonable
profit allowance were deducted.
•
Other intangible assets: For the valuation of customer relationships, 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 net 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 acquired subsidiary generated net sales in an amount of € 11 million as well as profits in an amount
of € 0 million for the period from January 2 to December 31, 2015.