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Note 12. Intangible assets
2016
€ million
Goodwill Trademarks Other
intangible
assets
Prepayments Total
2016
Cost
Cost as at 1 January 101.6 70.9 229.5 8.4 410.3
Currency translation differences -0.0 1.8 2.3 4.1
Additions 152.2 25.1 14.6 191.8
Acquisitions 58.3 39.6 6.2 104.0
Disposals -0.1 -9.8 -9.9
Deductions -10.5 -0.2 -10.7
Transfers between items -4.0 8.0 -10.7 -6.7
Cost as at 31 December 249.6 131.0 284.0 18.3 682.9
Accumulated amortisation and impairment
Accumulated amortisation and impairment charges as at 1 January -60.6 -7.4 -174.0 0.0 -241.8
Currency translation differences 0.1 -0.4 -1.8 -2.1
Accumulated depreciation, amortisation and impairment on disposals 0.1 3.8 3.9
Accumulated depreciation and amortisation on deductions 0.6 10.5 11.1
Amortisation charge for the year and impairments -23.4 -23.4
Accumulated amortisation and impairment charges as at 31 December -59.7 -7.8 -184.9 0.0 -252.3
Carrying amount as at 1 January 41.0 63.5 55.5 8.4 168.4
Carrying amount as at 31 December 189.9 123.3 99.1 18.3 430.6
2015
€ million
Goodwill Trademarks Other
intangible
assets
Prepayments Total
2015
Cost
Cost as at 1 January 145.2 72.9 213.2 11.5 442.7
Currency translation differences 0.1 -2.0 -2.8 -0.0 -4.6
Additions 19.1 6.5 25.6
Deductions -43.8 -4.4 -5.4 -53.6
Transfers between items 4.3 -4.2 0.1
Cost as at 31 December 101.6 70.9 229.5 8.4 410.3
Accumulated amortisation and impairment
Accumulated amortisation and impairment charges as at 1 January -104.2 -7.8 -152.9 -264.8
Currency translation differences -0.1 0.5 2.4 2.8
Accumulated amortisation of deductions and transfers 43.8 1.8 45.6
Amortisation charge for the year and impairments -25.3 -25.3
Accumulated amortisation and impairment charges as at 31 December -60.6 -7.4 -174.0 0.0 -241.8
Carrying amount as at 1 January 41.0 65.1 60.4 11.5 177.9
Carrying amount as at 31 December 41.0 63.5 55.5 8.4 168.4
Other intangible assets include other non-current expenditure, of which €55.4 million (€33.4 million) are software and licence costs.
Goodwill and intangible rights by segment
€ million Trademarks*
2016
Goodwill
2016
Discount
rate
(WACC)**
2016
Trademarks*
2015
Goodwill
2015
Discount
rate
(WACC)**
2015
Grocery trade 76.1 6.0 - - -
Building and technical trade
Byggmakker, Norway 25.9 7.0 24.5 6.0
Onninen 58.3 55.1 7.1 - - -
Kesko Senukai, Baltics 20.5 7.0 18.3 7.0
K-rauta Rus, Russia 14.5 11.0 14.6 11.4
Indoor, Finland 39.1 4.1 7.0 39.1 4.1 6.0
Car trade 19.7 7.0 0.2
Total 123.3 189.9 63.5 37.2
* Intangible assets with indefinite useful lives
** After tax, rate used in impairment testing
The car trade excluded, the cash generating units have been identified at a lower level than the reportable segments. The units have been identified at the chain level. The €3.8 million goodwill related to Konekesko's Yamarin business is presented within available-for-sale non-current assets.
The useful lives of trademarks (brands) included in intangible assets have been classified as indefinite, because it has been estimated that the period over which they generate cash inflows is indefinite. This is because no foreseeable limit to the period over which they are expected to generate net cash inflows for the Group can be seen. Trademarks are part of assets acquired in connection with acquisitions.
Intangible assets with indefinite useful lives are tested annually for possible impairment and whenever there is an indication of impairment.
Impairment test for goodwill and intangible assets
In impairment testing, the recoverable amount of a cash-generating unit is determined based on value-in-use calculations. These calculations use cash flow projections based on financial plans approved by management, covering a period of three years. The key assumptions used for the plans are total market growth and profitability trends, changes in store site network, product and service selection, pricing and movements in operating costs. Cash flows beyond this period have been extrapolated mainly based on 1.0–4.0% (1.0–4.0%) forecast growth rates, allowing for country-specific differences.
The discount rate used is the weighted average cost of capital (WACC) after tax, specified for each segment and country and adjusted for tax effect in connection with the test. The WACC formula inputs are risk-free rate of return, market risk premium, industry-specific beta factor, target capital structure, borrowing cost and country risks. As a result of the update of calculation parameters, discount rates fell in Russia and rose in Norway and Finland compared to the previous year.
Impairment losses
There were no impairment charges recognised on goodwill or intangible rights in the financial years 2016 and 2015.
Sensitivity analysis
The key variables used in impairment testing are the EBITDA margin and the discount rate. The most sensitive to movements in assumptions in the building and technical trade are the brand related to the Byggmakker business and the goodwill related to the Russian business. If their residual EBITDA decreased by more than 0.3-0.5 percentage points, an impairment would be recognised. Regarding the other cash generating units, according to management’s estimates, a foreseeable change in any key variable would not create a situation in which the unit’s recoverable amount would be lower than its carrying amount.