Goodwill is not amortized but is tested at least annually for impairment.
Goodwill allocated to cash-generating units:
Home, excl. Royal Copenhagen
Goodwill from acquisitions is allocated to Cash Generating Units (CGU). The business areas, which form the CGUs, are Home and Garden. Goodwill of Royal Copenhagen has been tested for impairment separately from the Home business area in 2013. From 2014 on, it will be tested as part of Home business area. The recoverable amounts from CGUs are determined with value in use method, using five-year discounted cash flow projections, based on strategic plans approved by management. Cash flows for the period extending over the planning period are calculated using the terminal value method. The discount rate is the weighted average post-tax cost of capital (WACC) as defined by Fiskars. The components of the WACC are risk-free rate, market risk premium, company-specific risk premium, industry specific equity beta, cost of debt and debt to equity ratio.
An impairment of goodwill of EUR 3.7 million was made in Q3 2013 due to divesting of Fiskars UK Sankey business which was a part of Garden EMEA business area.
On the basis of the impairment calculations made, there has been no need for other impairment of goodwill for any CGU for the period ended December 31, 2012 and 2013.
Since the benefits from trademarks are indefinite, they are not amortized but are tested at least annually for impairment using a relief from royalty method. Cash flows attributable to trademarks are derived by indentifying revenues from sales of products belonging to each trademark. The carrying amounts of trademarks are determined on a discounted cash flow method basis, derived from five-year cash flow projections, based on strategic plans approved by the management. Cash flows for the period extending over the planning period are calculated using the terminal value method. On the basis of the impairment calculations made, there has been no need for impairment of trademarks for the periods ended December 31, 2012 and 2013.
Key parameters applied in impairment testing
Increase in net sales on average
Steady growth rate in projecting terminal value
Discount rate, pre-tax, average
* The increases in net sales, used in impairment testings, are on average more moderate than strategic plans for the planning period. The EBIT used in impairment testing is the CGU's actual three previous years average EBIT-% of sales. This is consistently used for all periods in the five year discounted cash flow projections.
** Used one percentage point higher risk premium than in goodwill testing.
Sensitivity analyses of goodwill have been carried out for the valuation of each CGU by making downside scenarios for key parameters. The management views that no reasonably possible change in any of the key parameters would lead to impairment as the recoverable amounts exceed the carrying amounts considerably.
Sensitivity analyses of trademarks have been carried out for the valuation of each trademark by making downside scenarios for key parameters. The management views that excluding trademark Gingher, no reasonably possible change in any of the key parameters would lead to impairment. The recoverable amount of trademark Gingher currently exceeds its carrying amount of EUR 3.3 million by EUR 0.8 million, and an increase of 1.7 percentage point in pre-tax discount rate would result in the recoverable amount being equal to the carrying amount.
Welcome to the Fiskars Annual Report. In our online report you can in a convenient way have a look into our financial statements, our businesses, our sustainability and personnel. In addition to browsing the site of the annual report content, you can download and share different parts of the content.