Saab 2011 Annual Report Download - page 105

NOTE 16, CONT.
Other intangible assets
Group Parent Company
MSEK 2011 2010 2011 2010
Acquisition value
Opening balance, 1 January 1,551 1,500 1,376 1,310
Acquired through business
acquisitions 160 1 24 -
Investments 26 70 22 68
Disposals and reclassifications 3 -9 4 -2
Translation differences 9 -11 - -
Closing balance, 31 December 1,749 1,551 1,426 1,376
Amortisation and impairments
Opening balance, 1 January -1,036 -887 -969 -846
Amortisation for the year -186 -161 -146 -125
Disposals and reclassifications - 9 - 2
Translation differences -1 3 - -
Closing balance, 31 December -1,223 -1,036 -1,115 -969
Carrying amount,
31 December 526 515 311 407
Acquired through business acquisitions  largely relates to Sensis and
comprises customer relations and trademarks.
Amortisation is included in the following lines in income statement
Group Parent Company
MSEK 2011 2010 2011 2010
Cost of goods sold 185 161 185 164
Marketing expenses 1 - - -
Research and
development costs 588 644 200 200
Impairments are included in the following lines in income statement
Group Parent Company
MSEK 2011 2010 2011 2010
Other operating expenses 21 5 . -
Research and
development costs - 20 . -
Development costs
e signicant items in total capitalisation are development costs for radar
and sensors, electronic warfare systems, air trac management (), the
export version of Gripen and the anti-ship missile  k.
Development costs are capitalised only in the consolidated accounts. In
legal units, all costs for development work are expensed. Capitalised develop-
ment costs in the Parent Company relate to acquired development costs.
Other intangible fixed assets
Signicant items in the carrying amount are attributable to the acquisitions
of Ericsson Microwave Systems and Sensis and relate to expenses incurred
for customer relations, trademarks and values in the order backlog. Of the
carrying amount,  ,   is attributable to acquired values and
  to licenses for operating systems etc.
Impairment tests for goodwill
In connection with business combinations, goodwill is allocated to the cash-
generating units that are expected to obtain future economic benets in the
form, for example, of synergies from the acquisition. Saab’s business areas
have been identied as separate cash-generating units. e following cash-
generating units have signicant recognised goodwill values in relation to the
Group’s total recognised goodwill value. Goodwill in every cash-generating
unit has been tested for impairment.
Goodwill in the Parent Company relates to acquired goodwill from Saab
Microwave Systems.
MSEK 31-12-2011 31-12-2010
Dynamics 572 571
Electronic Defence Systems 2,253 1,988
Security and Defence Solutions 999 491
Support and Services 240 240
Combitech 159 159
Other units, aggregated - 21
Total goodwill 4,223 3,470
Impairment testing for cash-generating units is based on the calculation of
value in use. is value is based on discounted cash ow forecasts according
to the units’ business plans.
VARIABLES USED TO CALCULATE VALUE IN USE
Volume/growth
Growth in the cash-generating units’ business plans is based on Saab’s expec-
tations with regard to development in each market area and previous experi-
ence. e rst ve years are based on the ve-year business plan formulated
by Group Management and approved by the Board. For cash ows aer ve
years, the annual growth rate has been assumed to be  () per cent.
Operating margin
e operating margin is comprised of the units’ operating income aer
depreciation and amortisation. e units’ operating margin is calculated
against the backdrop of historical results and Saab’s expectations with regard
to the future development of markets where the units are active. e busi-
ness areas Dynamics, Electronic Defence Systems and Security and Defence
Solutions have a substantial order backlog of projects that stretches over a
number of years. e risks and opportunities aecting the operating margin
are managed through continuous cost forecasts for all signicant projects.
Capitalised development costs
In the ve-year business plans, consideration is given to additional invest-
ments in development considered necessary for certain units to reach the
growth targets in their respective markets.
Discount rate
Discount rates are based on the weighted average cost of capital (). e
 rate that is used is based on a risk-free rate of interest in ve years
adjusted for operational and market risks. e discount rate is in line with the
external requirements placed on Saab and similar companies in the market.
All units have sales of defence materiel, unique systems, products and sup-
port solutions in the international market as their primary activity, and their
business risk in this respect is considered equivalent. However, units with a
signicant share of the business plan’s invoicing in the order backlog have
been discounted at an interest rate that is slightly lower units with a short
order backlog.
e following discount rates have been used (pre-tax):
Pretax discount rate (WACC)
Per cent 2011 2010
Dynamics 11 11
Electronic Defence Systems 11 11
Security and Defence Solutions 11 11
Support and Services 13 13
Combitech 13 13
Sensitivity analysis
Group Management believes that reasonable possible changes in the above
variables would not have such a large impact that any individually would
reduce the recoverable amount to less than the carrying amount.
FINANCIAL INFORMATION > NOTES
SAAB ANNUAL REPORT 2011 101