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Financial statements Marks and Spencer Group plc Annual report and financial statements 2013 98
Notes to the financial statements continued
14 Intangible assets
Goodwill
£m
Brands
£m
Computer
software
£m
Computer
software under
development
£m
Total
£m
At 2 April 2011
Cost or valuation 127.6 80.0 427.1 58.2 692.9
Accumulated amortisation – (34.6) (130.6) – (165.2)
Net book value 127.6 45.4 296.5 58.2 527.7
Year ended 31 March 2012
Opening net book value 127.6 45.4 296.5 58.2 527.7
Additions – 32.4 72.9 52.9 158.2
Transfers – – 37.0 (37.0) –
Disposals – – (1.0) – (1.0)
Impairment (34.4) – – – (34.4)
Amortisation charge – (5.3) (60.0) – (65.3)
Exchange difference (0.6) – (0.3) – (0.9)
Closing net book value 92.6 72.5 345.1 74.1 584.3
At 31 March 2012
Cost 127.0 112.4 535.4 74.1 848.9
Accumulated amortisation and impairment (34.4) (39.9) (190.3) – (264.6)
Net book value 92.6 72.5 345.1 74.1 584.3
Year ended 30 March 2013
Opening net book value 92.6 72.5 345.1 74.1 584.3
Additions – – 50.2 136.9 187.1
Transfers – – 27.8 (27.8) –
Amortisation charge – (5.3) (71.1) – (76.4)
Closing net book value 92.6 67.2 352.0 183.2 695.0
At 30 March 2013
Cost 127.0 112.4 613.4 183.2 1,036.0
Accumulated amortisation and impairment (34.4) (45.2) (261.4) – (341.0)
Net book value 92.6 67.2 352.0 183.2 695.0
Goodwill relates to the following business units:
per una
£m
Marks and
Spencer
Czech
Republic a.s.
£m
Supreme
Tradelinks
Private
Limited
£m
Total
£m
Net book value at 31 March 2012 69.5 15.4 7.7 92.6
Exchange difference – – – –
Net book value at 30 March 2013 69.5 15.4 7.7 92.6
Goodwill is not amortised, but tested annually for impairment with the recoverable amount being determined from value in use
calculations. Goodwill has been allocated for impairment testing purposes to groups of cash-generating units (CGUs) which include the
combined retail and wholesale businesses. The key assumptions for the recoverable amount of all units are the long-term growth rate
and the discount rate. The long-term growth rate used is purely for the impairment testing of goodwill under IAS 36 – ‘Impairment of
Assets’ and does not reflect long-term planning assumptions used by the Group for investment proposals or for any other assessments.
The pre-tax discount rate is based on the Group’s weighted average cost of capital, taking into account the cost of capital and
borrowings, to which specific market-related premium adjustments are made: per una discount rate 10.7% (last year 10.6%), Marks and
Spencer Czech Republic a.s. 12.2% (last year 12.3%) and Supreme Tradelinks Private Limited 17.4% (last year 12.7%).
The valuations use cash flows based on detailed financial budgets prepared by management covering a three year period. Cash
flows beyond this three year period are extrapolated for Marks and Spencer Czech Republic a.s. at a growth rate of 1.5% (last year
1.5%) and Supreme Tradelinks Private Limited at a growth rate of 6% (last year 1.5%). To stress test, nil growth has been assumed
for per una. These rates do not exceed the long-term average growth rate for the Group’s retail businesses.
If a zero per cent growth rate is assumed or the discount rate is increased by a pre-tax rate of 3%, per una, Marks and Spencer
Czech Republic a.s. and Supreme Tradelinks Private Limited goodwill would not be impaired.
Last year, due to the economic environment in Greece and neighbouring countries, the Marks and Spencer Marinopoulos B.V.
goodwill was impaired in full giving rise to a charge of £34.4m.
Brands consist of the per una brand cost of £80.0m and the M&S Mode brands of £32.4m. The per una brand is a definite life
intangible asset and is amortised on a straight line basis over a period of 15 years and is only assessed for impairment where such
indicators exist. The M&S Mode brands have been attributed an indefinite life as they give the Group the future right to use the
‘M&S’ brand across Europe. This is consistent with the Group’s expansion plans in Europe and existing M&S brand recognition from
its current presence. Similar to goodwill, the M&S Mode brands are assessed for impairment annually based on their value in use.
The M&S Mode brands have been allocated for impairment testing across the European business. No brand impairment charge has
been recognised in 2012/13.