Annual Report 2015

13. Intangible assets

 

2015

         

EUR million

Goodwill

Intangible

rights

Develop-

ment

costs

Advances

paid and

work in

progress

Total

Cost on 1 Jan

246.2

218.9

29.1

9.2

503.5

Translation differences and other adjustments

-0.2

-4.9

   

-5.1

Acquired businesses

3.1

2.6

   

5.6

Sale of businesses

       

0.0

Additions

 

8.4

0.1

8.1

16.6

Disposals

 

-6.7

   

-6.7

Transfers between items

 

1.0

1.1

-2.1

0.0

Cost on 31 Dec

249.1

219.4

30.3

15.2

513.9

           

Accumulated amortization and impairment losses 1 Jan

-63.1

-168.9

-25.6

-3.4

-261.0

Translation differences and other adjustments

 

1.9

   

1.9

Sale of businesses

       

0.0

Amortization for the financial period

 

-15.2

-0.9

 

-16.1

Impairments

 

-7.6

-1.054

 

-8.6

Accumulated amortization on disposals and transfers

 

6.6

   

6.6

Accumulated amortization and impairment losses 31 Dec

-63.1

-183.3

-27.5

-3.4

-277.3

           

Carrying amount on 1 Jan

183.1

50.0

3.5

5.9

242.4

Carrying amount on 31 Dec

186.0

36.1

2.7

11.9

236.7

           

2014

         

EUR million

Goodwill

Intangible

rights

Develop-

ment

costs

Advances

paid and

work in

progress

Total

Cost on 1 Jan

238.3

238.1

26.1

9.1

511.6

Translation differences and other adjustments

3.7

-16.8

   

-13.1

Acquired businesses

4.2

1.1

   

5.3

Additions

 

4.2

 

8.3

12.4

Disposals

 

-12.7

   

-12.7

Transfers between items

 

5.1

3.0

-8.1

0.0

Cost on 31 Dec

246.2

218.9

29.1

9.2

503.5

           

Accumulated amortization and impairment losses 1 Jan

-58.3

-174.7

-25.1

-3.4

-261.5

Translation differences and other adjustments

-4.8

10.6

   

5.8

Amortization for the financial period

 

-16.0

-0.5

 

-16.6

Impairments

 

-1.4

   

-1.4

Accumulated amortization on disposals and transfers

 

12.7

   

12.7

Accumulated amortization and impairment losses 31 Dec

-63.1

-168.9

-25.6

-3.4

-261.0

           

Carrying amount on 1 Jan

180.0

63.4

1.0

5.8

250.1

Carrying amount on 31 Dec

183.1

50.0

3.5

5.9

242.4

           

Intangible rights include customer relationships acquired in business combinations as well as brands, licenses, and applications.

           

Goodwill allocation

           

Goodwill is allocated to the Group's cash-generating units (CGUs) as follows:

           

EUR million

     

2015

2014 *)

Postal Services

     

44.1

44.1

OpusCapita

     

107.1

104.1

Parcel and Transportation Services

     

21.8

22.0

Supply Chain Solutions

     

12.9

12.9

Total

186.0

183.1

*) Restated to correspond the revised CGU-structure

           

The result of the goodwill impairment testing in 2015

           

In the third quarter of 2015, the Group performed an impairment test on each cash-generating unit containing goodwill. Posti Group does not have other intangible assets with unlimited useful life. The impairment test did not result in recognition of impairment.

Impairment testing and sensitivity analysis

           

The recoverable amount of the CGU's is based on the value-in-use method. The value-in-use is based on forecasted discounted cash flows. Cash flow forecasts are prepared for a five-year period and they are based on strategic plans. The forecasts and the assumptions about the development of the business environment are in line with the current business structure and approved by the management. The key assumptions influencing the cash flow forecasts are the long-term market growth, market positions and the profitability level. Investments are expected to be ordinary replacement investments. The tests were performed applying the euro-exchange rates of the foreign currencies on the testing date.

           

The terminal value beyond five years of cash-generating units is based on a moderate growth rate expectation of 1.0% (+0% – +2.0%) with the exception of Postal Services where the estimated terminal growth rate is -5% due to expected decline in paper delivery volumes.

           

Weighted average cost of capital (WACC) before taxes determined for each CGU has been used as discount rate. The calculation components are risk-free interest rate, market risk premium, beta for business area, target capital structure, the cost of debt and the country-specific risks. The basis for the risk-free discount rate was derived from the State bond rate. The discount rates decreased in comparison with previous year which is mainly attributable to decrease in risk-free interest rates.

           

The table below shows the key outcomes and the parameters used in testing.  The corresponding figures for the previous period are given in parentheses.*)

           
 

Value-in-use

exceeds

carrying

amount, MEUR

EBIT

margin

average, %

Terminal

growth

rate, %

Discount

rate, %

Terminal

year EBIT

margin, %

Postal Services

460 (229)

8,6 (8,3)

-5,0 (-5,0)

6,8 (6,9)

7,0 (5,0)

OpusCapita

172 (359)

6,4 (9,8)

1,0 (2,0)

8,2 (7,6)

8,2 (10,5)

Parcel and Transportation Services

296 (109)

1,1 (-2,2)

1,0 (2,0)

7,2 (6,8)

2,6 (3,0)

Supply Chain Solutions

92 (29)

10,3 (7,7)

1,0 (2,0)

6,9 (7,0)

11,9 (7,8)

           

*) Comparative data restated to correspond the revised CGU-structure

           

Preparation of a sensitivity analysis was not considered necessary with regard to Postal Services and Parcel and Transportation Services, since the recoverable amounts clearly exceeded the carrying amount of the tested assets.

A sensitivity analysis was performed for other cash-generating units by determining which key parameter values would produce a carrying amount that would equal the value-in-use. The parameters used in the analysis were terminal year growth rate, discount rate and EBIT margin during the forecast period and terminal year. The analysis was carried out by changing the values of a single parameter while leaving the others constant. The table below indicates the limits within which the carrying amount and value-in-use are equal.

           
     

Terminal

growth

rate, %

Discount

rate, %

EBIT

margin, %

Supply Chain Solutions

   

-9.0

12.7

5.3

OpusCapita

   

-13.5

15.6

3.3