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Note 9 Intangible assets


In € millions

Goodwill

Brands

Customer lists

Other intangibles

Total

1

Mainly ICI.

2

Accumulated amortization/impairment includes €1,275 million impairment recorded on ICI intangibles in 2008.

 

 

 

 

 

 

Balance at January 1, 2008

 

 

 

 

 

Acquisition cost

502

104

110

68

784

Cost of internally developed intangibles

12

12

Accumulated amortization/impairment

(39)

(3)

(40)

(45)

(127)

 

 

 

 

 

 

Carrying value

463

101

70

35

669

 

 

 

 

 

 

Movements in 2008

 

 

 

 

 

Acquisitions through business combinations1

4,485

2,344

1,181

305

8,315

Other investments – including internally developed intangibles

10

2

43

55

Divestments

(3)

(6)

(3)

(12)

Amortization

(18)

(101)

(40)

(159)

Impairments

(1,215)

(79)

(2)

(1,296)

Changes in exchange rates

(176)

(195)

(33)

4

(400)

Total changes

3,101

2,046

1,044

312

6,503

 

 

 

 

 

 

Balance at December 31, 2008

 

 

 

 

 

Acquisition cost

4,822

2,247

1,253

345

8,667

Cost of internally developed intangibles

32

32

Accumulated amortization/impairment

(1,258)

(100)

(139)

(30)

(1,527)

 

 

 

 

 

 

Carrying value at year-end 2008

3,564

2,147

1,114

347

7,172

 

 

 

 

 

 

Movements in 2009

 

 

 

 

 

Acquisitions through business combinations

33

4

47

10

94

Other investments – including internally developed intangibles

1

41

42

Amortization

(16)

(106)

(37)

(159)

Impairments

(9)

(9)

Changes in exchange rates

106

91

28

23

248

Total changes

139

79

(30)

28

216

 

 

 

 

 

 

Balance at December 31, 2009

 

 

 

 

 

Acquisition cost

5,063

2,338

1,334

473

9,208

Cost of internally developed intangibles

39

39

Accumulated amortization/impairment2

(1,360)

(112)

(250)

(137)

(1,859)

 

 

 

 

 

 

Carrying value at year-end 2009

3,703

2,226

1,084

375

7,388

Amortization and impairment charges per cost category

 

 

 

 

 

 

 

In € millions

Amortization

Impairment

Total

 

2008

2009

2008

2009

2008

2009

 

 

 

 

 

 

 

Cost of sales

(7)

(6)

(21)

(28)

(6)

Selling expenses

(133)

(123)

(1)

(133)

(124)

Impairment of ICI intangibles

(1,275)

(1,275)

General and administrative expenses

(14)

(24)

(14)

(24)

Research and development expenses

(5)

(6)

(5)

(6)

Other operating income/(expenses)

(8)

(8)

 

 

 

 

 

 

 

Total

(159)

(159)

(1,296)

(9)

(1,455)

(168)

Goodwill and other intangibles per segment

 

 

 

 

 

 

 

In € millions

Goodwill

Brands with indefinite
useful lives1

Other intangibles with finite useful lives

 

2008

2009

2008

2009

2008

2009

1

Mainly Dulux. Due to its global presence, high recognition and strategic nature, we have determined that the useful life of the Dulux brand is indefinite.

 

 

 

 

 

 

 

Decorative Paints

2,368

2,515

1,643

1,760

818

798

Performance Coatings

541

529

249

213

Specialty Chemicals

655

659

56

56

842

858

 

 

 

 

 

 

 

Total

3,564

3,703

1,699

1,816

1,909

1,869

Other intangibles include licenses, know-how, intellectual property rights and development cost. Both at year-end 2009 and 2008, there were no purchase commitments for individual intangible assets. Neither were there any intangible assets registered as security for bank loans.

Impairment

Goodwill and other intangibles with indefinite useful lives are tested for impairment per business unit (one level below segment level) in the fourth quarter or whenever an impairment trigger exists. In 2009, no impairment was recorded for any business unit (2008: non-cash impairment charge of €1,275 million after tax).

The impairment test is based on cash flow projections of the five-year plan The key assumptions used in the projections are:

  • Revenue growth: based on actual experience, an analysis of market growth and the expected development of market share
  • Margin development: based on actual experience and management’s long-term projections.

Revenue growth and margin development projections are extrapolated beyond this five-year explicit forecast period for another five years with reduced growth rates, except for the emerging markets.

Average revenue growth rates per forecast period per business area

 

 

 

in %/year

 

 

 

2010 – 2014

2015 – 2019

 

 

 

Decorative Paints

5.6

3.9

Performance Coatings

3.3

2.7

Specialty Chemicals

4.6

3.0

For virtually all business units, a terminal value was calculated using a long-term average market growth rate that did not exceed 2 percent. The estimated pre-tax cash flows are discounted to their present value using a pre-tax weighted average cost of capital. The discount rates are determined for each business unit and range from 8.9 percent to 21.7 percent, with an average of 12.8 percent.

A significant amount of goodwill is allocated to the European businesses of Decorative Paints. The outcome of a sensitivity analysis of a 100 basis points adverse change in key assumptions (lower growth rates or higher discount rates respectively) did not result in a different outcome of the impairment test for the vast majority of our businesses.

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