185000000 IT Holding Finance SA

IT HOLDING S.p.A. Notes to the consolidated financial statements for the year ended December 31, 2003
18. Goodwill, trademarks, other intangible assets and deferred charges, net
Movements of intangible assets in 2003 were as follows:
(In thousands of Euros)
Development
cost
Patents and
trademarks
F- 70
Goodwill Assets in
formation and
advanced
Other Total
Costs
Balance at January 1, 2003 979 264,495 159,344 9,745 6,551 441,114
Acquisitions 2,998 948 - - - 3,946
Other movements 1,458 230 (1,975) (9,745) 5,500 (4,532)
Write-downs (1,200) (29,214) (23,182) - (971) (54,567)
Balance at December 31, 2003 4,235 236,459 134,187 - 11,080 385,961
Depreciation
Balance at January 1, 2003 (175) (35,516) (35,592) - (1,222) (72,505)
Depreciation of the year (827) (14,849) (11,636) - (1,651) (28,963)
Balance at December 31, 2003 (1,002) (50,365) (47,228) - (2,873) (101,468)
Carrying amount
At January 1, 2003 804 228,979 123,752 9,745 5,329 368,609
At December 31, 2003 3,233 186,094 86,959 - 8,207 284,493
The balance of the item trademark is basically determined by the brand Ferré purchased in 2002 for Euro 175 million.
The write-down in Patents and trademarks is related to the Gigli trademark by €29,214 thousand, as part of the
strategic decision to discontinue the business development of that brand.
Goodwill related to certain past acquisitions, for a total amount of €23,182 thousand, which, on the basis of the
current market prospects and Group’s strategic refocusing do not ensure recoverability with sufficient certainty and
within a reasonable timeframe was written down.
Considering the losses of 2003, the carrying amount of the assets, including intangible assets, were tested for
impairment. Due to the high level of integration within the group, the impairment test was carried out at segment level
(the segments being the identified cash generating units in the circumstance) for the two divisions Apparel and
accessories and Eyewear. The perfume division was not included as it was discontinued at the beginning of 2003 (see
note 7).
The estimate of the recoverable amounts was based on values in use, determined on the following assumptions:
Wacc (grossed up pre tax) for the two divisions were as follows:
2004 2005 2006 2007 2008 Perpetuity
Apparel and accesories 11.89% 12.96% 12.67% 12.48% 12.20% 12.20%
Eyewear 7.19% 7.19% 7.19% 7.19% 7.19% 10.00%
• Forecast of free cash flows for the next five years for both divisions.
• Terminal value based on a perpetuity of 1.92% on Apparel division and of 1.5% on the Eyewear division (both
rates are lower than the long term inflation rate which corresponds to a nil actual growth).
As a result of this impairment test no additional impairment proved to be necessary.