Electrolux 2013 Annual Report Download - page 123

Note 13 Goodwill and other intangible assets
Intangible assets with indefinite useful lives
Goodwill as at December 31, 2013, has a total carrying value of
SEK 4,875m. In addition, the right to use the Electrolux trademark in
North America, acquired in 2000, has been assigned an indefinite useful
life. The total carrying amount for the right is SEK410m, included in the
item Other in the table below. The allocation, for impairment-testing pur-
poses, on cash-generating units of the significant amounts is shown in
the table below.
All intangible assets with indefinite useful lives are tested for impair-
ment at least once every year. Single assets can be tested more often in
case there are indications of impairment. The recoverable amounts of the
cash-generating units have been determined based on value in use cal-
culations. The cash-generating units equal the business areas.
Value in use is calculated using the discounted cash-flow model and
based on a three-year forecast made by Group Management. The fore-
cast is built up from the estimate of the units within each business area.
The preparation of the forecast requires a number of key assumptions
such as volume, price, product mix, which will create a basis for future
growth and gross margin. These figures are set in relation to historic fig-
ures and external reports on market growth. The cash flow for the third
year is used as the base for the fourth year and onwards in perpetuity.
The discount rates used are, amongst other things, based on the individ-
ual countries’ inflation, interest rates and country risk. The pre-tax dis-
count rates used in 2013 were for the main part within a range of 8.3 to
16.5%. For the calculation of the in-perpetuity value, Gordon’s growth
model is used. According to Gordon’s model, the terminal value of a
growing cash flow is calculated as the starting cash flow divided by cost
of capital less the growth rate. Cost of capital less growth has been
assumed at 6% (6) for all markets. This corres ponds to a weighted aver-
age cost of capital for the Group of 11% (11) less an average nominal
growth rate of 5% (5). The cost of capital and growth rate is estimated to
be higher than the average in emerging markets and lower in developed
markets. However, the resulting difference is assumed to be equal in all
markets over time. Management believes that any reasonably possible
adverse change in the key assumptions would not reduce the recover-
able amount below its carrying amount.
Goodwill, value of trademark and discount rate
2012 2013
Goodwill
Electrolux
trademark
Discount
rate, % Goodwill
Electrolux
trademark
Discount
rate, %
Major Appliances Europe, Middle East and Africa 1,828 —14.1 1,671 — 16.5
Major Appliances North America 358 410 9.6 356 410 8.3
Major Appliances Latin America 1,631 —16.0 1,359 —15.6
Major Appliances Asia/Pacific 1,434 —9.1 1,220 —8.7
Other 290 —8.0-11.3 269 —9.7-10.4
Total 5,541 410 4,875 410
Group
Other intangible assets Parent company
Goodwill
Product
development
Program
software Other
Total other
intangible
assets
Trademarks,
program
software, etc.
Acquisition costs
Opening balance, January 1, 2012 6,008 2,508 2,887 2,475 7,870 2,682
Acquired during the year — — 88 290 —
Acquisition of operations –104 — — –57 –57 —
Internally developed —477 486 —963 266
Reclassification —–24 915 — —
Fully amortized —–57 –11 –19 –87 —
Write-off —–19 — — –19 —
Exchange-rate differences –363 –148 –41 –103 –292 —
Closing balance, December 31, 2012 5,541 2,737 3,418 2,313 8,468 2,948
Acquired during the year — — 62 163 —
Internally developed —442 452 5899 378
Reclassification —26 –12 –14 — —
Fully amortized —–121 –1,010 —–1,131 –991
Write-off —–23 — — –23 —
Exchange-rate differences –666 –29 17 –196 –208 —
Closing balance, December 31, 2013 4,875 3,032 2,927 2 ,10 9 8,068 2,335
Accumulated amortization
Opening balance, January 1, 2012 —1,376 808 540 2,724 854
Amortization for the year —439 275 175 889 162
Fully amortized —–57 –11 –19 –87 —
Exchange-rate differences —–79 –21 –37 –137 —
Closing balance, December 31, 2012 —1,679 1,051 659 3,389 1,016
Amortization for the year —406 370 155 931 200
Fully amortized —–121 –1,010 —–1,131 –988
Write-off — — 906 —906 893
Exchange-rate differences — 7 9 –54 –38 —
Closing balance, December 31, 2013 —1,971 1,326 760 4,057 1,121
Carrying amount, December 31, 2012 5,541 1,058 2,367 1,654 5,079 1,932
Carrying amount, December 31, 2013 4,875 1,061 1,601 1,349 4,011 1,214
121ANNUAL REPORT 2013