Å kodaAuto ANNUAL REPORT 2006 - Skoda Auto

Goodwill Capitalised Capitalised Other Total
development development intangible assets
costs for products costs for products
currently in use under development
Costs
Balance at 1.1.2006 87 19,366 3,810 3,047 26,310
Additions 1 624 2,138 226 2,989
Disposals – – – (102) (102)
Transfers – 2 993 (2 993) (13) (13)
Foreign exchange differences (5) – – (9) (14)
Balance at 31.12.2006 83 22,983 2,955 3,149 29,170
Amortization and impairment
Balance at 1.1.2006 – (11,493) – (1,607) (13,100)
Amortisation – (2,367) – (451) (2,818)
Disposals and transfers – – – 91 91
Foreign exchange differences – – – 8 8
Balance at 31.12.2006 – (13,860) – (1,959) (15,819)
Carrying amount at 31.12.2006 83 9,123 2,955 1,190 13,351
Other intangible assets include mainly rights to use the equipment of the Volkswagen group for the development of new platforms and
software.
Amortisation of intangible assets of CZK 2,602 million (2005: CZK 2,342 million) is included in the cost of sales, CZK 69 million (CZK 2005:
54 million) in distribution expenses, and CZK 147 million (2005: CZK 129 million) in administrative expenses.
Impairment tests for goodwill
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The recoverable amount of a cash-generating unit is
calculated based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by the
management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rate that
does not exceed the long-term average growth rate for automotive industry. The expected growth rate for the impairment test in 2006 was
1% (2005: 1%). The discount rates used are pre-tax rates reflecting specific risks and characteristics of the segment where the Company
operates. For the year 2006, the discount rate of 9.0% (2005: 9.0%) was used.
The following amounts were recognised in the income statement as research and development expenses:
2006 2005
Research and non-capitalised development costs 1,940 2,552
Amortisation of development costs 2,367 2,081
Research and development costs recognised in the income statement 4,307 4,633
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