25 Intangible assets

Million CHF

Goodwill

Other intangible assets

Total

2014

 

 

 

Net book value as at January 1

6,881

605

7,486

Change in structure

(2)

0

(2)

Reclassification from assets classified as held for sale

20

13

33

Additions

0

32

33

Disposals

0

0

0

Amortization

0

(67)

(67)

Impairment loss (charged to statement of income)

(1)

0

(1)

Currency translation effects

278

20

297

Net book value as at December 31

7,176

603

7,779

 

 

 

 

At cost of acquisition

7,422

1,609

9,032

Accumulated amortization/impairment

(247)

(1,006)

(1,253)

Net book value as at December 31

7,176

603

7,779

 

 

 

 

2013

 

 

 

Net book value as at January 1

7,386

745

8,131

Change in structure

(44)

(13)

(57)

Reclassification to assets classified as held for sale

(50)

(15)

(64)

Additions

0

23

23

Disposals

0

0

0

Amortization

0

(76)

(76)

Impairment loss (charged to statement of income)

(5)

(1)

(5)

Currency translation effects

(407)

(57)

(465)

Net book value as at December 31

6,881

605

7,486

 

 

 

 

At cost of acquisition

7,127

1,544

8,671

Accumulated amortization/impairment

(246)

(939)

(1,184)

Net book value as at December 31

6,881

605

7,486

The other intangible assets have finite useful lives, over which the assets are amortized. The corresponding amortization expense is recognized mainly in administration expenses.

Impairment tests for goodwill

For the purpose of impairment testing, goodwill is allocated to a cash generating unit or to a group of cash generating units that are expected to benefit from the synergies of the respective business combination. The Group’s cash generating units are defined on the basis of the geographical market, normally country- or region-related. The carrying amount of goodwill allocated to the countries or regions stated below is significant in comparison with the total carrying amount of goodwill, while the carrying amount of goodwill allocated to the other cash generating units is individually not significant.

For the impairment test, the recoverable amount of a cash generating unit, which has been determined based on value-in-use, is compared to its carrying amount. An impairment loss is only recognized if the carrying amount of the cash generating unit exceeds its recoverable amount. Future cash flows are discounted using the weighted average cost of capital (WACC).

The cash flow projections are based on a three-year financial planning period approved by management. Cash flows beyond the three-year budget period are extrapolated based either on steady or increasing sustainable cash flows. In any event, the growth rate used to extrapolate cash flow projections beyond the three-year budget period does not exceed the long-term average growth rate for the relevant market in which the cash generating unit operates.

In respect of the goodwill allocated to “Others”, the same impairment model and parameters are used, as is the case with individually significant goodwill positions, except that different key assumptions are used depending on the risks associated with the respective cash generating units.

Key assumptions used for value-in-use calculations in respect of goodwill 2014

Cash generating unit
(Million CHF)

Carrying amount of goodwill

Currency

Pre-tax
discount rate

Long-term GDP growth rate

1

Individually not significant.

North America

1,788

USD/CAD

7.1%

2.4%

India

1,257

INR

9.9%

6.6%

United Kingdom

843

GBP

6.8%

2.8%

Central Europe

510

CHF/EUR

6.1%

1.3%

Philippines

393

PHP

9.5%

5.0%

Mexico

374

MXN

8.3%

4.0%

France Benelux

288

EUR

7.1%

1.6%

Australia

279

AUD

7.5%

2.9%

Eastern Europe

274

Various

8.0%

3.6%

Others1

1,170

Various

6.7%–28.5%

1.3%–8.4%

Total

7,176

 

 

 

Key assumptions used for value-in-use calculations in respect of goodwill 2013

Cash generating unit
(Million CHF)

Carrying amount of goodwill

Currency

Pre-tax
discount rate

Long-term GDP growth rate

1

Individually not significant.

North America

1,647

USD/CAD

7.6%

3.3%

India

1,160

INR

13.1%

6.9%

United Kingdom

805

GBP

6.9%

2.1%

Central Europe

515

CHF/EUR

6.0%

1.9%

Philippines

391

PHP

10.2%

5.5%

Mexico

378

MXN

7.8%

3.3%

France Benelux

293

EUR

7.3%

1.8%

Australia

290

Various

7.2%

3.3%

Eastern Europe

273

AUD

8.8%

3.2%

Others1

1,129

Various

6.4%–27.8%

1.3%–7.5%

Total

6,881

 

 

 

Sensitivity to changes in assumptions

With regard to the assessment of value-in-use of a cash generating unit or a group of cash generating units, management believes that except for France Benelux, Brazil and Spain (both included in Others above), a reasonably possible change in the pre-tax discount rate of 1 percentage point, and a 1 percentage point change in long-term GDP growth rate in cases where increasing sustainable cash flows were used, would not cause the carrying amount of a cash generating unit or a group of cash generating units to materially exceed its recoverable amount. With the used pre-tax discount rate of 7.1 percent, the impairment test for France Benelux resulted in a recoverable amount exceeding its carrying amount by CHF 91 million. An increase in the pre-tax discount rate to 7.5 percent would result in the recoverable amount of France Benelux to be equal to its carrying amount. With the used pre-tax discount rate of 8.5 percent, the impairment test for Brazil resulted in a recoverable amount exceeding its carrying amount by CHF 215 million. An increase in the pre-tax discount rate to 9.2 percent would result in the recoverable amount of Brazil to be equal to its carrying amount. With the used pre-tax discount rate of 6.8 percent, the impairment test for Spain resulted in a recoverable amount exceeding its carrying amount by CHF 9 million. An increase in the pre-tax discount rate to 7.0 percent would result in the recoverable amount of Spain to be equal to its carrying amount.