IMMOEAST Annual Report 2006/07

Subsequent expenditures on an intangible asset after its acquisition or completion are expensed as incurred unless:
it is probable that these expenditures will enable the asset to generate a future economic benefit which exceeds the
originally estimated earning power, and these expenditures can be estimated reliably and exactly allocated to the
asset. The company has no internally generated intangible assets.
3.3 Differences arising from the consolidation
3.3.1 Goodwill
Additional information on goodwill is provided under point 4.3.2.
The difference between the cost of a business combination and the proportional share of revalued net assets as of the
acquisition date is recorded as goodwill and recognised as an asset in accordance with IFRS 3. Goodwill represents a
payment made by the acquirer in anticipation of future economic benefits to be gained from assets that cannot be
individually identified or separately recognised. Goodwill is not amortised on a regular basis, but is tested for impairment
each year or on an interim basis if there are signs of a loss in value. Goodwill does not generate cash flows that
are independent of the cash flows of other assets or groups of assets and often contributed to the cash flows of several
cash-generating units. For this reason, goodwill is assigned to cash-generating units for the purpose of impairment
testing. The need to recognise an impairment charge to a cash-generating unit is determined by comparing the
carrying value with the recoverable amount. If the recoverable amount is less than the carrying value, an impairment
charge is recognised at the amount of this difference to reduce the carrying amount to the recoverable amount. Any
remaining difference is allocated to the other assets in the cash-generating unit in proportion to their carrying values.
The allocation of an impairment charge to individual assets may not reduce the carrying value of the asset below the
highest of the following amounts: a) fair value less costs to sell, b) value in use, and c) zero. All impairment charges
are recognised immediately to the income statement. Subsequent increases in value are not permitted.
The unit or group of units to which goodwill is assigned for the impairment test represents the lowest level of the
company at which the goodwill is monitored for management purposes, and is not larger than a segment determined
in accordance with IFRS 8 or IAS 14. For the purpose of impairment testing, the carrying value of the cash-generating
unit is increased by the carrying value of the goodwill. This total is compared with the recoverable amount of the
cash-generating unit in a next step, and any negative difference results in an impairment charge to goodwill. The
recoverable amount of the cash-generating unit comprises the fair value of the property as determined by an expert
opinion plus the fair value of deferred tax liabilities.
The acquisition of project companies generally leads to positive goodwill because of the obligation to record deferred
tax liabilities on revalued properties. The unequal valuation of these deferred tax liabilities – which, in contrast to
other acquired net assets, may not be discounted – results in goodwill as a technical figure. In creating the cash-generating
unit, the carrying values of the deferred tax liabilities recognised on property are added together with the
assets and goodwill, and compared with the recoverable value of the unit. The deferred tax liabilities are represented
in the cash-generating unit at a recoverable value of zero. This reflects the fact that – although property transactions
normally take the form of share deals – the deduction of deferred tax liabilities on the purchase and sale of property
companies is generally difficult or impossible to enforce in the markets in which IMMOEAST is active. The inclusion of
deferred tax liabilities in the carrying value of cash-generating units represents a modification of the impairment tests
performed on goodwill in previous years. This modification is based on the fact that nearly 100% of all property transactions
are executed as share deals and the buyer must assume the deferred tax liabilities on such transactions.
Notes
Report by the Executive Board 173
Highlights 2006/07
Business Model and Strategy
Portfolio Structure
Corporate Governance and Outlook
Property Portfolio
Development of Business
Consolidated Financial Statements
Service and Glossary
IAS 38.60
IFRS 3.51
IFRS 3.54 in
connection
with IAS 36.96
IAS 36.90
IAS 36.104
IAS 36.105
IAS 36.80
IFRS 3.57b in
connection
with IFRS 3.B
16 (i) & IAS
12.53