Business Report 2005 - Interseroh

Review of Value by Impairment Tests
The value of assets are reviewed in the INTERSEROH Group at least once a year at year end or more
often if special reasons for this become apparent at the level of the cash generating unit (CGU) in the
sense of IAS 36 (Impairment of Assets). Based on the economic interdependencies, INTERSEROH
has identified the two segments of “services and raw materials trading” and “steel and metal recycling”
as independent cash generating units.
In the segment steel and metal recycling scrap is bought unsorted in small quantities, sorted,
processed if necessary and then sold in large quantities. Fundamentally the segment is transparent
regarding realisable selling prices and market developments in general. Further, the segment’s trade
volumes overall are significant to the consumers, which has an additional positive effect on the
negotiating positions of the individual companies. The contributions of the segment therefore result on
the whole from internal transparency of information in the segment combined with market and
especially price advantages from the segment-wide consolidation of sales volumes. In so far and due
to collective management by the parent company, the individual companies cannot be seen as “largely
independent”, but rather all companies in this segment are classified as a CGU.
The companies in the segment services and raw materials trading render waste disposal
services. The secondary raw materials obtained in the course of these services are consolidated and
resold to large customers by the same unit or a sister unit within the framework of contracts. Since the
companies in this segment are also managed collectively and both buying and marketing as well as
the related contributions cannot be seen independently of the other companies, the companies in this
segment also form a CGU together.
In the impairment tests the residual book values of the individual cash generating units are
compared with their respective recoverable amounts as the higher value of net selling price and value
in use. The calculation of the value in use is based on the cash value of future payments forecast for
the next three years in the current individual plans of the INTERSEROH Group by business field and
site. The cash value of the future payments corresponds here to the average planned EBIT for the
following three years on the basis of an earning capacity factor of five.
The plans are based on the assumption that against the background of the new general
election and the related positive effect on consumption the economy will grow by up to 1.4 percent. It
was further presumed that the year 2006 will remain difficult due to the comparatively high
unemployment, the continued structural problems in Germany and restrained spending due to the
uncertain pension and labour market situations.
It is presumed consumption in the services segment will improve and therefore also the
economic situation of the industries concerned. The level of June 2005 was presumed as price basis.
A price basis at the level of June 2004 was used for the planning of the steel and metal
recycling segment.
The capital costs are considered at the average of equity and debt capital weighted by their
respective market values, with the equity capital costs corresponding to the yield expectations of
management for the business and the debt capital costs the current financing conditions of the
INTERSEROH Group.
If the recoverable amount of the cash generating unit calculated in this way is lower than its
book value, there is an impairment loss amounting to the difference. In the event of an impairment loss
the value of any goodwill in the cash generating unit concerned is first adjusted. Any residual amount
still remaining after this is distributed proportionately to the other assets of the respective cash
generating unit on the basis of the residual book values of every single asset on the closing date.
No indication of a need for value adjustments emerged in the course of the impairment tests..
Use of Assumptions and Estimates
Assumptions and estimates were made when preparing the consolidated financial statements that had
an effect on the reporting and amount of the assets, debts, earnings, expenses and contingent
liabilities. These assumptions and estimates relate on the whole to the definition of periods of
economic use, the valuation of provisions and the realisability of future tax relief used uniformly
throughout the group. The actual values can differ in each individual case from the assumptions and
estimates made.
Changes are made with effect on net income when better is known.
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