Saab 2014 Annual Report Download - page 101

FINANCIAL INFORMATION – NOTES
Goodwill is distributed by business area as follows:
MSEK 31-12-2014 31-12-2013
Dynamics 596 585
Electronic Defence Systems 2,407 2,337
Security and Defence Solutions 1,458 1,177
Support and Services 246 246
Combitech 308 260
Total goodwill 5,015 4,605
Impairment testing for cash-generating units is based on the calculation of value in
use. This value is based on discounted cash flow forecasts according to the units’
business plans. For Electronic Defence Systems and Support and Services, fore-
cast cash flows have exceeded the outcome of the last two years. Saab’s assess-
ment is that this does not cause any impairment.
VARIABLES USED TO CALCULATE VALUE IN USE
Volume/growth
Growth in the cash-generating units’ business plans is based on Saab’s expecta-
tions with regard to development in each market area and previous experience. It is
also based on estimates of cash flows that are distributed over what are often long
projects and are dependent on the timing and size of advances and milestone pay-
ments. The first five years are based on the five-year business plan formulated by
Group Management and approved by the Board. For cash flows after five years,
the annual growth rate has been assumed to be 0 (0) per cent.
Operating margin
The operating margin is comprised of the units’ operating income after deprecia-
tion and amortisation. The units’ operating margin is calculated against the back-
drop of historical results and Saab’s expectations with regard to the future develop-
ment of markets where the units are active. All business areas except for Combi-
tech have a substantial order backlog of projects that stretches over a number of
years. The risks and opportunities affecting the operating margin are managed
through continuous cost forecasts for all significant projects.
Capitalised development costs
In the five-year business plans, consideration is given to additional investments 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 (WACC). The
WACC rate that is used is based on a risk-free rate of interest in ten years adjusted
for, among other things, market risks. The 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 support
solutions in the international market as their primary activity, and their business risk
in this respect is considered equivalent.
During the year a review was made of the cost of capital and new risk assess-
ments were conducted within each business area. Recent years’ order bookings
have increased the share of projects across business areas and changed the com-
position of the order backlog for certain units, which complicates a differentiation of
discount rates between business areas. As a result, Saab has decided to apply a
uniform discount rate in the impairment tests.
The following discount rates have been used (pre-tax):
Pre-tax discount
rate (WACC)
Per cent 2014 2013
Dynamics 10 11
Electronic Defence Systems 10 11
Security and Defence Solutions 10 11
Support and Services 10 13
Combitech 10 13
Sensitivity analysis
Group Management believes that reasonable possible changes in the above vari-
ables would not have such a large impact that any individually would reduce the
recoverable amount to less than the carrying amount
NOTE 17 TANGIBLE FIXED ASSETS
Group Parent Company
MSEK 31-12-2014 31-12-2013 31-12-2014 31-12-2013
Operating properties/
buildings and land 1) 2,066 1,888 1,463 1,340
Plant and machinery 803 651 514 445
Equipment, tools and
installations 459 349 283 197
Construction in progress 374 351 314 297
Total 3,702 3,239 2,574 2,279
1) In the Group, the reported amount refers to operating properties. In the Parent Company,
the reported amount refers to buildings and land.
Operating properties/buildings and land 1)
Group Parent Company
MSEK 2014 2013 2014 2013
Acquisition value
Opening balance,
1 January 4,881 4,917 1,928 1,881
Business combinations 243 - - -
Investments 91 43 84 41
Reclassifications 131 -13 95 6
Divestments -535 -36 -20 -
Translation differences 47 -30 - -
Closing balance,
31 December 4,858 4,881 2,087 1,928
Depreciation and write-
downs
Opening balance,
1 January -2,993 -2,936 -1,485 -1,421
Depreciation for the year -90 -96 -56 -64
Business combinations -164 - - -
Reclassifications - 24 - -
Divestments 467 13 20 -
Translation differences -12 2 - -
Closing balance,
31 December -2,792 -2,993 -1,521 -1,485
Revaluations
Opening balance,
1 January - - 897 897
Closing balance,
31 D ecember - - 897 897
Carrying amount,
31 D ecember 2,066 1,888 1,463 1,340
1) In the Group, the reported amount refers to operating properties. In the Parent Company,
the reported amount refers to buildings and land.
Operating properties include a property leased by Saab Sensis in the US through a
financial lease. The financial lease extends through 2025. The carrying amount is
MSEK 98. The property is depreciated on a straight-line basis over its period of use
through 2025.
Total future minimum lease fees amount to MSEK 125, of which MSEK 11 is due
within one year, MSEK 45 after one year but within five years, and MSEK 69 after
five years. The present value of future minimum lease fees is MSEK 104.
Note16, cont.
SAAB ANNUAL REPORT 2014 – 97