Pallet-Management-Services - AFM

The following three cash-generating units are defined:
• RPC-Management-Services Europe
• RPC-Management-Services United States
• Pallet-Management-Services
RPC-Management-Services Europe
The recoverable amount of this cash-generating unit has been determined based on the value
in use calculation using cash flow projections approved by senior management covering a 5year
period. The pretax discount rate applied to cash flow projections is 9.5% (2005: 11.8%)
and cash flows beyond the 5-year period are extrapolated using a 1.8% (2005: 1.8%) growth
rate which is based on an average long term GDP (Gross Domestic Product) growth rate for the
European countries in which IFCO SYSTEMS is operating.
RPC-Management-Services United States
The recoverable amount of this cash-generating unit has been determined based on the value
in use calculation using cash flow projections approved by senior management covering a 5year
period. The pretax discount rate applied to cash flow projections is 12.1% (2005: 15.1%)
and cash flows beyond the 5-year period are extrapolated using a 3.0% (2005: 3.1%) growth
rate which is based on an average long term GDP growth rate for the United States.
Pallet-Management-Services
The recoverable amount of this cash-generating unit has been determined based on the value
in use calculation using cash flow projections based on financial budgets approved by senior
management covering a 5-year period. The pretax discount rate applied to cash flow projections
is 12.1% (2005: 15.1%) and cash flows beyond the 5-year period are extrapolated using a 3.0%
(2005: 3.1%) growth rate which is based on an average long term GDP growth rate for the
United States.
Key assumptions used in value in use calculation:
The Company projected the cash flows for the five-year period based on detailed assumptions
for every cash-generating unit and its specific markets. The model used is the same the
Company used in prior years providing a profit and loss account, balance sheet and cash flow
statement as well as assumptions for key performance indicators.
The calculation of value in use is sensitive to the assumptions for
• Market share – as well as using industry data for growth rates management assesses
how the position of the three cash generating units, relative to its competitors, might
change over the budget period.
• Gross margins – key elements for all three cash generating units are logistic costs (e.g.
transportation, washing, labor) and material price development for Pallet-Management-
Services. Based on average values achieved in prior periods, these costs are projected
by including anticipated efficiency improvements and cost developments related to
portfolio changes.
• Future investment needs in the RPC pool based on trip growth at average turn rates and
maintenance to replace broken crates and shrinkage.
Management has assessed these factors and their possible future impacts very carefully to build
up the projection.
The Company used for risk free interest rates 20 year EUR-Germany-Sovereigns and EUR-
Composite-AAA. In order to cover the additional risks IFCO SYSTEMS used appropriate public
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