Note 13 • Intangible assets
|
€’000 |
Software |
Trademarks |
Licenses |
Property rights |
Goodwill |
Total |
|
Cost |
||||||
|
At 31 December 2008 |
13,248 |
1,082 |
2,924 |
30 |
5,398 |
22,682 |
|
Additions |
4,262 |
98 |
– |
3,300 |
– |
7,660 |
|
Disposals |
(28) |
– |
– |
– |
– |
(28) |
|
Re-classification |
1,871 |
– |
– |
– |
– |
1,871 |
|
Translation |
(33) |
– |
– |
– |
– |
(33) |
|
At 31 December 2009 |
19,320 |
1,180 |
2,924 |
3,330 |
5,398 |
32,152 |
|
Additions |
5,224 |
180 |
– |
– |
– |
5,404 |
|
Disposals |
(237) |
– |
– |
– |
– |
(237) |
|
Re-classification |
(130) |
– |
– |
– |
– |
(130) |
|
Translation |
690 |
– |
– |
– |
– |
690 |
|
At 31 December 2010 |
24,867 |
1,360 |
2,924 |
3,330 |
5,398 |
37,879 |
|
Amortisation |
||||||
|
At 31 December 2008 |
6,495 |
585 |
2,924 |
– |
– |
10,004 |
|
Charge for the year |
2,641 |
85 |
– |
– |
– |
2,726 |
|
Disposals |
(28) |
– |
– |
– |
– |
(28) |
|
Re-classification |
855 |
– |
– |
– |
– |
855 |
|
Translation |
(75) |
– |
– |
– |
– |
(75) |
|
At 31 December 2009 |
9,888 |
670 |
2,924 |
– |
– |
13,482 |
|
Charge for the year |
4,094 |
85 |
– |
– |
– |
4,179 |
|
Disposals |
(221) |
– |
– |
– |
– |
(221) |
|
Re-classification |
99 |
– |
– |
– |
– |
99 |
|
Translation |
341 |
– |
– |
– |
– |
341 |
|
At 31 December 2010 |
14,201 |
755 |
2,924 |
– |
– |
17,880 |
|
Net Book Value |
||||||
|
At 31 December 2008 |
6,753 |
497 |
– |
30 |
5,398 |
12,678 |
|
At 31 December 2009 |
9,432 |
510 |
– |
3,330 |
5,398 |
18,670 |
|
At 31 December 2010 |
10,666 |
605 |
– |
3,330 |
5,398 |
19,999 |
Goodwill
During 1997, the Group acquired the remaining 49 percent of the Group’s interest in Portugal from a party related to the af Jochnick family. This resulted in a goodwill amount of €2.3 million. During 2001, goodwill of €4.6 million arose on acquisition of Rockport Mauritius Ltd and at the end of 2001, the minority shareholders of Oriflame India Pvt. Ltd were bought out which resulted in goodwill of €1.8 million. Upon issuance of IFRS3 – Business combinations, the Group discontinued amortisation of existing goodwill and the carrying amount of the accumulated amortisation (€3.3 million) was eliminated with a corresponding decrease in goodwill.
For the purpose of impairment testing, goodwill is allocated by geographical segment as reported in note 3. At reporting date, the goodwill was tested for impairment with a pre-tax discount rate of 9 percent (9 percent). The recoverable amounts of the goodwill are determined based on value-in-use calculations. Both in 2010 and 2009 these calculations used cash flow projections based on financial forecasts made by Group Management covering a five year period.
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 profit. These figures are set in relation to historic figures and external reports on market growth. Growth rate assumptions used for the evaluation are in line with market growth data, as last year. Average market growth rates for the five year period are for Portugal 4 percent (4 percent) and for India 13 percent (13 percent).
Termination value has been calculated based on the result of the fifth year result without any future growth assumptions divided by the discount rate.
Based on the above assumptions Management made several sensitivity analyses and came to the conclusion that any reasonably possible adverse change in the key assumptions would not reduce the recoverable amount below its carrying amount. No impairment loss was recognised in 2010 and 2009.
Property rights
At the beginning of 2009 the Group purchased the property rights for a dry food composition technology used in some of the wellness products. This technology is used throughout the Group where wellness products are sold, and therefore is not allocated to a specific geographic segment. The useful life of this technology was classified as indefinite as Oriflame has an exclusive, perpetual, unlimited right to use it. The recoverable amount is determined based on value-in-use calculations. These calculations used cash flow projections based on financial forecast covering a five year period (seven year period). The preparation of the forecast requires a number of key assumptions such as volume and price which will create a basis for future growth and gross profit. Calculation was based on a pre-tax discount rate of 9 percent (9 percent) and a market growth rate of 7 percent (7 percent).
Termination value has been calculated based on the result of the fifth year result without any future growth assumptions divided by the discount rate.
Based on the above assumptions Management made several sensitivity analyses and came to the conclusion that any reasonably possible adverse change in the key assumptions would not reduce the recoverable amount below its carrying amount. No impairment loss was recognised in 2010 and 2009.
Software Property rights
Included in software additions during the year are costs for own developed software for an amount of €835 (€940).