annual report - FIAT SpA
annual report - FIAT SpA
annual report - FIAT SpA
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Goodwill, trademarks and intangible assets with indefinite useful lives<br />
Goodwill is allocated to the Group’s cash-generating units (“CGUs”) identified as the Group’s operating sectors. The<br />
following table presents the allocation of goodwill across the sectors:<br />
(€ million)<br />
Continuing<br />
Operations<br />
At 31 December 2010<br />
Discontinued<br />
At 31 December 2009<br />
Operations Total Total<br />
Agricultural and Construction Equipment - 1,794 1,794 1,662<br />
Ferrari 786 - 786 786<br />
Production Systems 135 - 135 125<br />
Components 121 - 121 118<br />
Trucks and Commercial Vehicles - 52 52 56<br />
Metallurgical Products 18 - 18 18<br />
Fiat Group Automobiles 18 - 18 10<br />
Fiat Powertrain 2 - 2 1<br />
FPT Industrial - 2 2 -<br />
Goodwill net carrying amount 1,080 1,848 2,928 2,776<br />
At 31 December 2010 Trademarks and Other intangible assets with indefinite useful lives included in Discontinued<br />
Operations, attributable for €174 million to the Agricultural and Construction equipment sector, consisted of acquired<br />
trademarks and similar rights which have no legal, contractual, competitive or economic that limits their useful lives.<br />
For the purposes of impairment testing, these assets were attributed to the respective cash-generating units without<br />
the need for any recognition of impairment.<br />
Goodwill classified as Continuing Operations<br />
The vast majority of goodwill classified as Continuing Operations, representing approximately 85% of the total<br />
classified as Continuing Operations, is allocated to cash-generating units in the Ferrari and Production Systems<br />
sectors.<br />
The recoverable amount of the cash-generating units to which goodwill and other intangible assets with an indefinite<br />
useful life have been allocated is determined on the basis of their value in use, defined as the discounted value of the<br />
expected future operating cash flows at a rate of return that incorporates the risks associated with the particular cashgenerating<br />
units as of the valuation date. The discounted cash flows approach is dependent on several critical<br />
management assumptions, including estimates of future sales growth, gross margins, operating costs, terminal value<br />
growth rates, capital expenditures, changes in working capital requirements and the weighted average cost of capital<br />
(discount rate).<br />
More in particular, for Ferrari, the cash generating unit corresponds to the sector as a whole, while in Comau goodwill<br />
has been allocated to the System, Pico and Service businesses. In those sectors, the cash-generating unit<br />
recoverable amount is determined on the basis of their value in use defined as the discounted value of the expected<br />
future operating cash flows resulting from the estimates included in the 2010-2014 strategic plan of the sector,<br />
extrapolated for later years on the basis of medium- to long-term growth rates depending on the detailed nature of the<br />
operations and the extent to which they are differentiated and on the forecasts made by the individual sector to which<br />
the cash-generating units belong. These cash flows are then discounted using rates that take account of current<br />
market assessments of the time value of money and the specific risks inherent in individual cash-generating units.<br />
The recoverable amount of the Ferrari and Comau cash-generating units and of the respective goodwill is the value in<br />
use and is determined on the basis of the following assumptions:<br />
Terminal value<br />
growth rate<br />
Discount rate<br />
before taxes<br />
2010 2009<br />
Terminal value<br />
growth rate<br />
Discount rate<br />
before taxes<br />
Ferrari 2% 8.3% 2% 10.4%<br />
Production Systems 2% 9.0% 0% 9.0%<br />
The recoverable amount of the cash generating unit to which the Ferrari sector goodwill relates is significantly higher<br />
than its carrying amount; in addition, the exclusivity of the business, its historical profitability and its future earnings<br />
prospects indicate that this carrying amount will continue to be recoverable, even in the event of economic and market<br />
conditions which remain difficult.<br />
Fiat Group Consolidated Financial Statements at 31 December 2010 149