Annual Report 2013

Notes to the consolidated statement of
financial position

(1) Intangible assets

Cost
in million eurosTrademark rights and other rights
Assets with
indefinite useful
lives
Assets
with definite
useful lives
Internally generated
intangible
assets with definite
useful lives
GoodwillTotal
At January 1, 2012 1,248 1,538 174 6,723 9,683
Acquisitions16146090
Divestments
Additions52429
Disposals–7–7
Reclassifications into assets held for sale11–11–10
Reclassifications437
Translation differences–23–17–1–100–141
At December 31, 2012 / January 1, 2013 1,242 1,537 200 6,672 9,651
Acquisitions 1 11 12
Divestments –2 –2
Additions 9 23 32
Disposals –22 –5   –27
Reclassifications into assets held for sale –5 –5
Reclassifications 3 1 4
Translation differences –47 –79 –4 –309 –439
At December 31, 2013 1,195 1,449 215 6,367 9,226

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Accumulated amortization/impairment
in million eurosTrademark rights and other rights 
Assets with indefinite
useful lives
Assets
with definite
useful lives
Internally generated
intangible
assets with definite
useful lives
GoodwillTotal
At January 1, 20121378910111914
Divestments
Write-ups
Scheduled amortization8620106
Impairment losses
Disposals–7–7
Reclassifications into assets held for sale
Reclassifications
Translation differences–7–7
At December 31, 2012 / January 1, 20131386112111 1,006
Divestments
Write-ups –5 –5
Scheduled amortization 81 20 101
Impairment losses 8 5 13
Disposals –21 –5 –26
Reclassifications into assets held for sale –2 –2
Reclassifications –1 1
Translation differences –48 –2 –50
At December 31, 201316 872 135 14 1,037

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Net book values
in million eurosTrademark rights and other rights 
Assets with indefinite
useful lives
Assets
with definite
useful lives
Internally generated
intangible
assets with definite
useful lives
GoodwillTotal
At December 31, 20131,179 577 80 6,353 8,189
At December 31, 2012 1,22967679 6,661 8,645

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GoodwillGoodwill
Amount by which the total consideration for a company or a business exceeds the netted sum of the fair values of the individual, identifiable assets and liabilities.
represents the future economic benefit of assets that are acquired through business combinations and not individually identifiable and separately recognized, as well as expected synergies, and is recognized at cost. Trademarks and other rights acquired for valuable consideration are stated at purchase cost, while internally generated software is stated at manufacturing cost.

Additions to internally generated intangible assets mostly reflect investments in consolidating and optimizing our IT system environment for managing business processes in the Asia-Pacific region.

The change in goodwillgoodwill
Amount by which the total consideration for a company or a business exceeds the netted sum of the fair values of the individual, identifiable assets and liabilities.
resulting from acquisitions and divestments made in the fiscal year is presented in the section  “Acquisitions and divestments“.

GoodwillGoodwill
Amount by which the total consideration for a company or a business exceeds the netted sum of the fair values of the individual, identifiable assets and liabilities.
as well as trademarks and other rights with indefinite useful lives are subjected to an impairmentimpairment
Impairments of assets are recorded when the recoverable amount is lower than the carrying amount at which the asset is recognized in the statement of financial position. The recoverable amount is calculated as the higher of fair value less costs to sell (net realizable value) and value in use.
test at least once a year or when indicators of impairmentimpairment
Impairments of assets are recorded when the recoverable amount is lower than the carrying amount at which the asset is recognized in the statement of financial position. The recoverable amount is calculated as the higher of fair value less costs to sell (net realizable value) and value in use.
are present (“impairmentimpairment
Impairments of assets are recorded when the recoverable amount is lower than the carrying amount at which the asset is recognized in the statement of financial position. The recoverable amount is calculated as the higher of fair value less costs to sell (net realizable value) and value in use.
only” approach).

Amortization and impairmentimpairment
Impairments of assets are recorded when the recoverable amount is lower than the carrying amount at which the asset is recognized in the statement of financial position. The recoverable amount is calculated as the higher of fair value less costs to sell (net realizable value) and value in use.
of trademark rights and other rights are recognized as selling expenses. Amortization and impairmentimpairment
Impairments of assets are recorded when the recoverable amount is lower than the carrying amount at which the asset is recognized in the statement of financial position. The recoverable amount is calculated as the higher of fair value less costs to sell (net realizable value) and value in use.
of other intangible assets are allocated to the relevant functions in the consolidated statement of income.

In the course of our annual impairmentimpairment
Impairments of assets are recorded when the recoverable amount is lower than the carrying amount at which the asset is recognized in the statement of financial position. The recoverable amount is calculated as the higher of fair value less costs to sell (net realizable value) and value in use.
test, we reviewed the carrying amounts of goodwillgoodwill
Amount by which the total consideration for a company or a business exceeds the netted sum of the fair values of the individual, identifiable assets and liabilities.
and trademark rights and other rights with indefinite useful lives. The following table shows the cash-generating units together with the associated goodwillgoodwill
Amount by which the total consideration for a company or a business exceeds the netted sum of the fair values of the individual, identifiable assets and liabilities.
at book value at the reporting date. The description of the cashgenerating units can be found in the notes to the consolidated financial statements, 34, and in the Group management Report.

Book values – Goodwill
Cash-generating units (summarized)
in million euros
December 31, 2012 December 31, 2013
Goodwill Goodwill
Laundry 689 653
Home Care 788 753
Total Laundry & Home Care 1,477 1,406
Branded Consumer Goods 1,058 1,026
Hair Salon 100 98
Total Beauty Care 1,158 1,124
Industrial Adhesives 3,632 3,452
Adhesives for Consumers,
Craftsmen and Building
394 371
Total Adhesive Technologies 4,026 3,823

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We assess goodwillgoodwill
Amount by which the total consideration for a company or a business exceeds the netted sum of the fair values of the individual, identifiable assets and liabilities.
impairmentimpairment
Impairments of assets are recorded when the recoverable amount is lower than the carrying amount at which the asset is recognized in the statement of financial position. The recoverable amount is calculated as the higher of fair value less costs to sell (net realizable value) and value in use.
and impairmentimpairment
Impairments of assets are recorded when the recoverable amount is lower than the carrying amount at which the asset is recognized in the statement of financial position. The recoverable amount is calculated as the higher of fair value less costs to sell (net realizable value) and value in use.
to trademarks and other rights according to the fair-value-less-costs-to-sell approach on the basis of future estimated cash flowscash flows
Inflows and outflows of cash and cash equivalents divided within the statement of cash flows into cash flows from ordinary activities, from investing and acquisition activities, and from financing activities.
which are obtained from corporate budgets. The determination of fair valuefair value
Amount at which an asset or a liability might be exchanged or a debt paid in an arm’s length transaction between knowledgeable, willing parties.
(before deduction of costs to sell) is allocated to valuation level 3 (see note 21). The assumptions upon which the essential planning parameters are based reflect experience gained in the past, aligned to current information provided by external sources. Budgets are prepared on the basis of a financial planning horizon of three years. For the period after that, a growth rate in a range between 1 and 2 percent in the cash flowscash flows
Inflows and outflows of cash and cash equivalents divided within the statement of cash flows into cash flows from ordinary activities, from investing and acquisition activities, and from financing activities.
is assumed for the purpose of impairmentimpairment
Impairments of assets are recorded when the recoverable amount is lower than the carrying amount at which the asset is recognized in the statement of financial position. The recoverable amount is calculated as the higher of fair value less costs to sell (net realizable value) and value in use.
testing. The US dollar to euro exchange rate applied is 1.32. Taking into account specific tax effects, the cash flowscash flows
Inflows and outflows of cash and cash equivalents divided within the statement of cash flows into cash flows from ordinary activities, from investing and acquisition activities, and from financing activities.
in all cash-generating units are discounted at different rates reflecting the weighted average cost of capital (WACC)weighted average cost of capital (WACC)
Average return on capital, calculated on the basis of a weighted average of the cost of debt and equity. WACC represents the minimum return expected of a company by its lenders for financing its assets.
in each business unit: 6.00 percent after tax for Laundry & Home Care and Beauty Care, and 7.75 percent after tax for Adhesive Technologies. The reportable segment Industrial Adhesives is comprised of the two business areas Packaging, Consumer Goods and Construction Adhesives; and Transport, Metal, General Industry and Electronics. GoodwillGoodwill
Amount by which the total consideration for a company or a business exceeds the netted sum of the fair values of the individual, identifiable assets and liabilities.
at our Packaging, Consumer Goods and Construction Adhesives business in fiscal 2013 amounted to 1,782 million euros (previous year: 1,880 million euros), while goodwillgoodwill
Amount by which the total consideration for a company or a business exceeds the netted sum of the fair values of the individual, identifiable assets and liabilities.
at Transport, Metal, General Industry and Electronics had a value of 1,670 million euros in 2013 (previous year: 1,752 million euros).

In the Laundry & Home Care business unit, we have assumed an increase in sales during the three-year detailed forecasting horizon of 3 to 4 percent per year, with a slight increase in market share. Sales growth in the Beauty Care business unit over the three-year forecasting horizon is budgeted at around 4 percent per annum. Here, too, we expect a slight increase in market share. Sales in the Adhesive Technologies business unit are expected to grow by around 6 percent per annum on average over the detailed three-year forecasting horizon, and thus above the market average.

In all the business units, we assume that a future increase in the cost of raw materials can be extensively offset by cost reduction measures in purchasing and by passing the increase on to our customers, as well as through the implementation of efficiency improvement measures. Given our continued pro-active management of the portfolio, we anticipate achieving higher gross margins in all our business units.

The impairmentimpairment
Impairments of assets are recorded when the recoverable amount is lower than the carrying amount at which the asset is recognized in the statement of financial position. The recoverable amount is calculated as the higher of fair value less costs to sell (net realizable value) and value in use.
tests revealed sufficient impairmentimpairment
Impairments of assets are recorded when the recoverable amount is lower than the carrying amount at which the asset is recognized in the statement of financial position. The recoverable amount is calculated as the higher of fair value less costs to sell (net realizable value) and value in use.
buffers so that, as in the previous year, no impairmentimpairment
Impairments of assets are recorded when the recoverable amount is lower than the carrying amount at which the asset is recognized in the statement of financial position. The recoverable amount is calculated as the higher of fair value less costs to sell (net realizable value) and value in use.
of goodwillgoodwill
Amount by which the total consideration for a company or a business exceeds the netted sum of the fair values of the individual, identifiable assets and liabilities.
was required.

Trademark rights and other rights with indefinite useful lives are presented in the following table.

Book values – Trademark rights and other rights
December 31, 2012 December 31, 2013
by business area (summarized)
in million euros
Trademark and other rights
with indefinite useful lives
Trademark and other rights
with indefinite useful lives
Laundry 381 359
Home Care 244 234
Total Laundry & Home Care 625 593
Branded Consumer Goods 460 442
Hair Salon 13 13
Total Beauty Care 473 455
Industrial Adhesives 48 51
Adhesives for Consumers,
Craftsmen and Building
83 80
Total Adhesive Technologies 131 131

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The trademark rights with indefinite useful lives with a net book value of 1,179 million euros (previous year: 1,229 million euros) are established in their markets and will continue to be intensively promoted. Moreover, there are no other statutory, regulatory or competition-related factors that limit our usage of our brand names. The value of trademarks and other rights with indefinite useful lives attributable to our Industrial Adhesives segment is composed of 40 million euros (previous year: 42 million euros) for our Packaging, Consumer Goods and Construction Adhesives businesses, and 40 million euros (previous year: 41 million euros) for our Transport, Metal, General Industry and Electronics businesses.

Our annual impairmentimpairment
Impairments of assets are recorded when the recoverable amount is lower than the carrying amount at which the asset is recognized in the statement of financial position. The recoverable amount is calculated as the higher of fair value less costs to sell (net realizable value) and value in use.
tests on trademark rights and other rights with indefinite useful lives with a total value of 1,179 million euros (previous year: 1,229 million euros) resulted in impairmentimpairment
Impairments of assets are recorded when the recoverable amount is lower than the carrying amount at which the asset is recognized in the statement of financial position. The recoverable amount is calculated as the higher of fair value less costs to sell (net realizable value) and value in use.
losses of 8 million euros (previous year: 0 million euros) in our Laundry & Home Care business unit. An impairmentimpairment
Impairments of assets are recorded when the recoverable amount is lower than the carrying amount at which the asset is recognized in the statement of financial position. The recoverable amount is calculated as the higher of fair value less costs to sell (net realizable value) and value in use.
reversal of 5 million euros was made in fiscal 2013 for trademark rights in our Adhesive Technologies business unit.

The company also intends to continue using the brands disclosed as having definite useful lives. No impairmentimpairment
Impairments of assets are recorded when the recoverable amount is lower than the carrying amount at which the asset is recognized in the statement of financial position. The recoverable amount is calculated as the higher of fair value less costs to sell (net realizable value) and value in use.
losses were registered with respect to trademark rights and other rights with definite useful lives in 2013.