Notes to the Consolidated Financial Statement

 

15. Intangible assets  

€ 000

Goodwill

Development costs

Other intangible assets


Total 2011


Total 2010

Acquisition cost, 1 January

89,382

2,487

23,649

115,518

115,419

Capitalised development costs

-

-

-

-

-

Additions

-

-

1,177

1,177

244

Disposals

-

-

-

-

-145

Acquisition of subsidiary

-

-

-

-

-

Acquisition cost, 31 December

89,382

2,487

24,826

116,695

115,518

 

 

 

 

 

 

Accumulated depreciation and amortisation, 31 December

-23,837

-2,487

-14,679

-41,003

-38,841

Depreciation

-

-

-1,845

-1,845

-2,162

Amortisation

-21,002

-

-4,358

-25,360

-

Accumulated depreciation and amortisation, 31 December

-44,839

-2,487

-20,882

-68,208

-41,003

 

 

 

 

 

 

Book value, 1 January

65,545 0

8,970

74,514

76,578

Book value, 31 December

44,543

0

3,944

48,486

74,514

           

The Group carries out annual impairment tests for goodwill and intangible assets with an indefinite useful life, in accordance with the IAS 36 standard.

The distribution of goodwill and values subject to testing between divisions on the balance sheet date was as follows:

€ 000

Specified
intangible assets

Unallocated
goodwill

Other items

Total value
subject to testing

Enterprise Solutions

3,419

43,244

6,975

53,638

Mobile Solutions

0

1,299

2,803

4,102

Total

3,419

44,543

9,779

57,740


The goodwill in the Enterprise Solutions segment was mainly associated to the acquisition of Sentera Plc and Digia Sweden Ab and Samstock Ltd. The goodwill in the Mobile Solutions division was mainly associated with the combination of Digia Inc. and SysOpen Plc, as well as the acquisition of Yomi Software Ltd and Sunrise Resources Ltd. Allocated goodwill is presented in the intangible asset group ‘Other intangible assets’ and amortised over a period of 5-10 years.

The other items include the estimated working capital and fixed assets of the divisions.

Impairment testing

The Group has defined its business segments as cash-generating units (CGU). Goodwill impairment is tested by comparing the CGU fair value to the book value. The use values are based on the continuous use of an asset as well as on the financial plans and estimates of the CGU’s future development, approved by the relevant CGU management.

Present values for the Enterprise Solutions segment were calculated for the forecast period, based on the following assumptions: annual growth in net sales 3 per cent; operating profit 10 per cent; discount rate 8.9 per cent. Cash flows after the forecast period are estimated by means of cash-flow extrapolation that applies the assumptions given above.

Present values for the Mobile Solutions segment were calculated for the forecast period, based on the following assumptions: annual growth in net sales 2 per cent; operating profit 10 per cent; discount rate 10.9 per cent. Cash flows after the forecast period are estimated by means of cash-flow extrapolation that applies the assumptions given above.

Net sales growth is deemed the most critical factor in calculating the present values of cash flows. The amount of goodwill for Enterprise Solutions requires average annual growth of 0.9 per cent for business operations and 4.0 per cent profitability. The goodwill for Mobile Solutions requires net sales to remain constant and 3.7 per cent profitability.

In the second quarter of 2011, the company recorded a EUR 25.4 million writedown attributable to the goodwill and customer relations of the Mobile Solutions segment. This writedown was based on the company’s revision of the segment’s long-term income expectations, as the applicable legislation requires. The revised expectation is due to a sudden and radical transition in the business environment for contract engineering services. In the company’s view, this has markedly and permanently reduced demand for Symbian and MeeGo services.

On the balance sheet date, the Enterprise Solutions segment’s use value was EUR 137.5 million higher than the segment’s book value. The Mobile Solutions segment’s use value was EUR 9.1 million higher than the book value.