Download the Annual Report 2009 here (PDF) - Pandora

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PANDORA ANNUAL REPORT 2009 | FINANCIAL REPORT, GROUP
NOTES
NOTE 3. BUSINESS COMBINATIONS, CONTINUED
Description of the acquired assets and liabilities
Goodwill is stated at the amount by which the acquisition cost for the business combination exceeds the recognised value of the identifi able assets, liabilities and
contingent liabilities. Goodwill comprises future growth expectations, buyer-specifi c synergies, the workforce in place and know-how. None of the goodwill recognised
is deductible for income tax purposes.
In the business combination, two intangibles where identifi ed and measured separately from goodwill: the PANDORA brand (DKK 1,032,202 thousand) and the
distribution network (DKK 450,705 thousand).
The brand is a group of complementary intangible assets related to the trademarks, domain names, product, image and customer experience related to products
sold under the strong PANDORA brand. The brand is measured based on the relief from the royalty method. Based on the history and a very long future life span
expected of the brand, any set time would be arbitrary. Therefore, the brand is considered to have an indefi nite useful life.
The distribution network covers the Group’s relations with its distributors. The distribution network is measured based on an estimation of the costs the entity avoids
by owning the intangible asset and not needing to rebuild it (the cost approach). The distribution network is amortised over an expected useful life of 15 years.
Acquired gross contractual receivables totalled DKK 101,511 thousand and consist of trade receivables, which have been written down by DKK 100 thousand.The
net receivables acquired of DKK 101,411 thousand are considered to be stated at fair value and are expected to be collected.
DKK ‘000
Cash movements on acquisition
Purchase consideration transferred 2008 (included in cash outfl ow from investing activities) -2,097,981
Purchase consideration transferred 2009 (included in cash outfl ow from investing activities) -4,805
Transaction costs of the acquisition (included in cash infl ow from operating activities) -7,337
Net cash acquired with the subsidiary (included in cash outfl ow fom investing activities) 57,947
Net cash outfl ow on acquisition -2,052,176
Transactions recognised separately from the acquisition
In connection with the acquisition of the PANDORA core business, the Group paid transaction costs to advisors of DKK 7,337 thousand. These costs have been
expensed as administrative expenses in the consolidated income statement.
In addition, agreements were made to the effect that the former shareholders of the acquired business were to re-invest DKK 102,750 thousand in the Group’s parent
company, PANDORA Invest ApS. Furthermore, the former shareholders lent DKK 410,000 thousand to PANDORA Invest ApS as subordinated loans.
Also at the time of the acquisition, employment contracts with three of the former shareholders were entered into. The contracts were entered into on an arm’s
length basis, including remuneration and other terms. The employees have been paid, since the acquisition, in accordance with the contracts, and the costs have
been recognised in the consolidated income statement.
No other arrangements were entered into either before or in connection with the business combination that should be considered in the overall evaluation of the
accounting treatment of the business combination.
Post-combination information
From the date of acquisition, the companies contributed DKK 964,090 thousand to the Group’s revenue and DKK 299,359 thousand of the Group’s pre-tax profi t.