Intangible assets with indefinite useful lives
Goodwill as at December 31, 2010, has a total carrying value of SEK 2,295m. In addition, the right to use the Electrolux trademark in North America, acquired in May 2000, has been assigned an indefinite useful life. The total carrying amount for the right is SEK 410m, included in the item Other on the next page. The allocation, for impairment-testing purposes, on cash-generating units of the significant amounts is shown in the table below. The carrying amounts of goodwill allocated to Consumer Durables North America, Europe and Asia/Pacific are significant in comparison with the total carrying amount of goodwill.
All intangible assets with indefinite useful lives are tested for impairment at least once every year. Single assets can be tested more often in case there are indications of impairment. The recoverable amounts of the cash-generating units have been determined based on value in use calculations.
Value in use is calculated using the discounted cash-flow model and based on a three-year forecast made by Group Management. The forecast is built up from the estimate of the units within each business area. The preparation of the forecast requires a number of key assumptions such as volume, price, product mix, which will create a basis for future growth and gross margin. These figures are set in relation to historic figures and external reports on market growth. The cash flow for the third year is used as the base for the fourth year and onwards in perpetuity. A growth rate of 2% is assumed in the in-perpetuity calculation. The discount rates used are, amongst other things, based on the individual countries’ inflation, interest rates and country risk. The pre-tax discount rates used in 2010 were for the main part within a range of 8.5% to 19.4%. Management believes that any reasonably possible adverse change in the key assumptions would not reduce the recoverable amount below its carrying amount.
| Goodwill, value of trademark and discount rate | |||
| Goodwill | Electrolux trademark | Discount rate, % | |
| Europe | 368 | — | 9.9 |
| North America | 379 | 410 | 10.1 |
| Asia/Pacific | 1,468 | — | 10.8 |
| Other | 80 | — | 8.5–19.4 |
| Total | 2,295 | 410 | 8.5–19.4 |
| Goodwill and other intangible assets | |||||||
| Group Other intangible assets | Parent Company | ||||||
| Goodwill | Product development | Program software | Other | Total other intangible assets | Trademarks, software etc. | ||
| Acquisition costs | |||||||
| Opening balance, January 1, 2009 | 2,095 | 2,891 | 1,050 | 1,042 | 4,983 | 1,465 | |
| Acquired during the year | — | — | 171 | 10 | 181 | 8 | |
| Internally developed | — | 370 | 339 | — | 709 | 386 | |
| Reclassification | — | –1 | 1 | — | — | — | |
| Sold during the year | — | — | — | –67 | –67 | — | |
| Fully amortized | — | — | –3 | –5 | –8 | — | |
| Write-off | — | –22 | –1 | — | –23 | — | |
| Exchange-rate differences | 179 | –139 | –24 | 39 | –124 | — | |
| Closing balance, December 31, 2009 | 2,274 | 3,099 | 1,533 | 1,019 | 5,651 | 1,859 | |
| Acquired during the year | — | — | 107 | 2 | 109 | — | |
| Internally developed | — | 396 | 581 | — | 977 | 448 | |
| Reclassification | — | — | –2 | 2 | — | — | |
| Sold during the year | — | — | — | — | — | — | |
| Fully amortized | — | –775 | — | — | –775 | –24 | |
| Write-off | — | –1 | — | — | –1 | — | |
| Exchange-rate differences | 21 | –276 | –63 | –11 | –350 | — | |
| Closing balance, December 31, 2010 | 2,295 | 2,443 | 2,156 | 1,012 | 5,611 | 2,283 | |
| Accumulated amortization | |||||||
| Opening balance, January 1, 2009 | — | 1,414 | 284 | 462 | 2,160 | 362 | |
| Amortization for the year | — | 405 | 142 | 47 | 594 | 134 | |
| Sold and acquired during the year | — | — | — | –56 | –56 | — | |
| Fully amortized | — | — | –3 | –5 | –8 | — | |
| Impairment (+) / reversal of impairment (–) | — | — | — | 20 | 20 | — | |
| Exchange-rate differences | — | –83 | –14 | 39 | –58 | — | |
| Closing balance, December 31, 2009 | — | 1,736 | 409 | 507 | 2,652 | 496 | |
| Amortization for the year | — | 434 | 191 | 30 | 655 | 181 | |
| Sold and acquired during the year | — | — | — | — | — | — | |
| Fully amortized | — | –775 | — | — | –775 | –24 | |
| Impairment (+) / reversal of impairment (–) | — | — | — | — | — | — | |
| Exchange-rate differences | — | –158 | –29 | –10 | –197 | — | |
| Closing balance, December 31, 2010 | — | 1,237 | 571 | 527 | 2,335 | 653 | |
| Carrying amount, December 31, 2009 | 2,274 | 1,363 | 1,124 | 512 | 2,999 | 1,363 | |
| Carrying amount, December 31, 2010 | 2,295 | 1,206 | 1,585 | 485 | 3,276 | 1,630 | |
| Included in the item Other are trademarks of SEK 473m (489) and patents, licenses etc. amounting to SEK 12m (23). | |||||||
| Amortization of intangible assets are included within cost of goods sold with SEK 439m (459), administrative expenses with SEK 184m (133) and selling expenses with SEK 32m (2) in the income statement. Electrolux did not capitalize any borrowing costs during the period. | |||||||