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AFG Annual Report 2011 Consolidated Financial Statements AFG Arbonia-Forster-Group Notes to the Consolidated Financial Statements 39 Intangible assets in 1000 CHF Other intangible assets 140 Goodwill Total Net book value at 01/01/2010 85 901 65 024 150 925 Cost Balance at 01/01/2010 153 136 99 136 252 272 Foreign exchange differences − 8 019 − 4 482 − 12 501 Additions 1 682 1 682 Disposals − 1 066 − 1 066 Reclassifications 1 130 1 130 Balance at 31/12/2010 146 863 94 654 241 517 Foreign exchange differences − 903 − 509 − 1 412 Acquisition of subsidiaries 234 234 Additions 1 208 1 208 Disposals − 5 738 − 5 738 Reclassifications 1 043 1 043 Balance at 31/12/2011 142 707 94 145 236 852 Accumulated amortisation Balance at 01/01/2010 67 235 34 112 101 347 Foreign exchange differences − 4 124 − 1 235 − 5 359 Amortisation 11 049 11 049 Impairment 3 227 2 382 5 609 Disposals − 1 066 − 1 066 Reclassifications 13 13 Balance at 31/12/2010 76 334 35 259 111 593 Foreign exchange differences − 431 − 69 − 500 Amortisation 9 439 9 439 Impairment 22 700 1 501 24 201 Disposals − 5 738 − 5 738 Balance at 31/12/2011 102 304 36 691 138 995 Net book value at 31/12/2010 70 529 59 395 129 924 Net book value at 31/12/2011 40 403 57 454 97 857 Expenses for research and development in the amount of CHF 19.4 million (2010: CHF 20.2 million) have been charged to the income statement, since they did not fulfil the capitalisation criteria. In 2011, no capitalised development costs (2010: CHF 0.7 million) are included in other intangible assets under additions. All other additions under other intangible assets have been purchased or acquired.
AFG Annual Report 2011 in 1000 CHF Consolidated Financial Statements AFG Arbonia-Forster-Group Notes to the Consolidated Financial Statements 141 Impairments 2011 on other intangible assets As a result of a review towards the end of 2011 of the business plan at a foreign subsidiary an impairment of CHF 5.4 million had to be recorded on other intangible assets. Another impairment of CHF 17.3 million relates to the Surface Technology Division (see note 37). As of 31 December 2011 goodwill from business combinations is allocated to the Group's three cash-generating units (CGUs) Slovaktual, RWD Schlatter and EgoKiefer. The carrying amounts of goodwill per CGU are presented below: Slovaktual RWD Schlatter Underfloor convectors EgoKiefer Total At 31/12/2010 16 636 8 100 1 501 33 158 59 395 At 31/12/2011 16 196 8 100 33 158 57 454 Goodwill impairment tests 2011 The recoverability of goodwill is normally assessed annually towards the year-end. The recoverable amount of the CGUs is determined based on value in use calculations. These calculations use cash flow projections covering a five-year period. Cash flows beyond the five-year period are extrapolated using estimated growth rates. The underlying financial data consisting of one budget year and four plan years form part of the Group's medium term plan approved by management in early summer and were used for the impairment tests. For the CGU underfloor convectors a phasing-out of sales was assumed for the original ASCO Schmidlin underfloor convector, since this convector will be completely new designed and thus only slightly based on the original model. This resulted in an impairment requirement of CHF 1.5 million, so that goodwill had to be completely written off. The value in use calculation assumed a budgeted gross margin of 46.0 %, an average EBITDA margin of 12.1 %, phasing-out revenues until 2016 and a discount rate of 9.8 %. The value in use calculation for the annual 2011 impairment tests assumed the following key assumptions: in % Slovaktual RWD Schlatter EgoKiefer Budgeted gross margin 29.4 59.1 64.0 Growth rate 2.0 1.0 1.0 Discount rate 10.0 8.0 8.0 Budgeted gross margins were determined based on past performance, expectations for the market development and initiated optimisation measures. The growth rates used were consistent with the forecasts included in industry reports. The discount rates used were pre-tax and reflected specific risks relating to the relevant CGUs. Based on a reasonably possible change in the key assumptions, sensitivity analyses were calculated in 2011 on higher discount rates, lower than actually expected EBITDAs, lower gross margins and lower growth rates. None of these changes led to impairments.
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