Notes to the Consolidated Financial Statements

1. Basic information and principles of the report

2. Changes in Group structure

3. Summary of significant accounting policies

4. Risk assessment and management

5. Management of capital

6. Trade accounts receivable

7. Other current assets and current financial assets

8. Inventories

9. Property, plant and equipment

10. Other non-current assets and non-current financial assets

11. Goodwill and intangible assets

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  Total Goodwill Patents and
technology
Trademarks Other intangible
assets1
  MCHF MCHF MCHF MCHF MCHF
1 Others: mainly software and capitalised product development costs (see Note 27)
2018          
Cost at beginning of year 2,341.9 1,568.3 271.8 385.4 116.4
Additions 11.0 11.0
Disposals -4.3 -4.3
Transfers 0.4 0.4
Translation differences -63.4 -51.2 -5.3 -6.0 -0.9
Cost at end of year 2,285.6 1,517.1 266.5 379.4 122.6
           
Accumulated amortisation at beginning of year 593.0 222.2 234.8 61.8 74.2
Amortisation 55.2 36.5 8.1 10.6
Disposals -4.2 -4.2
Translation differences -10.1 -4.5 -4.9 -0.7
Accumulated amortisation at end of year 633.9 217.7 266.4 69.9 79.9
           
Carrying amounts at end of year 1,651.7 1,299.4 0.1 309.5 42.7
           
           
2017          
Cost at beginning of year 2,213.2 1,467.6 260.0 377.8 107.8
Changes in scope of consolidation -11.8 -11.6 -0.2
Additions 9.2 9.2
Disposals -1.9 -1.9
Translation differences 133.2 112.3 11.8 7.6 1.5
Cost at end of year 2,341.9 1,568.3 271.8 385.4 116.4
           
Accumulated amortisation at beginning of year 532.1 212.5 192.1 61.8 65.7
Changes in scope of consolidation -0.2 -0.2
Amortisation 44.6 35.0 9.6
Disposals -1.9 -1.9
Translation differences 18.4 9.7 7.7 1.0
Accumulated amortisation at end of year 593.0 222.2 234.8 61.8 74.2
           
Carrying amounts at end of year 1,748.9 1,346.1 37.0 323.6 42.2

Goodwill and intangible assets from acquisitions with an indefinite useful life are tested for impairment on an annual basis. No impairment arose on 31 December 2018. The following table lists the carrying amounts and parameters of the items that are material for the Group.

  Carrying
amount
  Carrying
amount
  Calculation of recoverable amount (PY numbers in brackets)
  31.12.2018   31.12.2017   Value in use (U)
or fair value less
cost to sell (F)
Growth rate
beyond planning
period
Discount rate
pre­tax
Discount rate
post­tax
  MCHF   MCHF     % % %
Goodwill 1,299.4   1,346.1   U 2.8 (2.9) 6.3 (6.2) 5.6 (5.6)
Geberit trademark 84.6   84.6   U 2.8 (2.9) 6.2 (6.2) 5.6 (5.6)
Various other trademarks 224.9   239.0   U 2.8 (2.0 - 2.9) 5.9 -6.9 (5.9 - 7.2) 5.8 - 6.7 (5.8 - 6.8)

Goodwill

The discounted cashflow method is applied to test the goodwill for impairment. The Group bases the impairment test on the results from the current business plan (for a four-year period) and the assumptions in this plan regarding price, market and market share developments. Growth rates after the end of the planning period are based on Euroconstruct forecasts and the Group’s own assumptions drawn from past experience regarding price and market share trends. A discount rate based on the Group’s weighted cost of capital is used to calculate the discounted future cashflows. Management regards the discount rate, growth rates and development of the operating margin as the key factors in calculating the recoverable amount.

Trademarks

The item “Various other trademarks” includes the trademarks Ifö, Keramag, Kolo, IDO, Twyford, Allia and Sphinx.

The relief from royalty method is used to test the trademarks (Ifö, Kolo, IDO and Twyford) for impairment. Impairment is tested against the Group’s estimated net sales attributable to the trademarks according to the current business plan (four-year period). Growth rates after the end of the planning period are based on Euroconstruct forecasts and the Group’s own assumptions drawn from past experience regarding price and market share trends. Discounted future cashflows are calculated using discount rates based on the Group’s weighted cost of capital taking into account country- and currency-specific risks.

On 7 March 2018, the Board of Directors approved the new brand strategy. This strategy foresees that some of the Bath & Shower Systems brands will be gradually integrated into the Geberit brand in the respective markets. Consequently, the affected brands (Keramag, Allia and Sphinx) now have a finite useful life causing total annual amortisation of around MCHF 8.0 over their remaining useful life.

Sensitivity analysis

The sensitivity analysis shows that changes to the key assumptions (discount rate +1.0 percentage points or growth rate -1.0 percentage points) that are realistically possible from today’s perspective would not result in any need to impair the goodwill or the trademarks.

12. Short-term debt

13. Other current liabilities and provisions

14. Long-term debt

15. Financial instruments

16. Retirement benefit plans

17. Participation plans

18. Deferred tax assets and liabilities

19. Other non-current liabilities and provisions

20. Contingencies

21. Capital stock and treasury shares

22. Earnings per share

23. Other operating expenses, net

24. Financial result, net

25. Income tax expenses

26. Operating Leasing

27. Research and development cost

28. Cashflow figures

29. Segment reporting

30. Related party transactions

31. Foreign exchange rates

32. Subsequent events

33. Group companies as at 31 December 2018

Services

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