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Annual Report 2015 Report by the Board of Directors Notes Proposed distribution of earnings Auditor’s report Eleven-year review Quarterly information

Note 13 Goodwill and other intangible assets

All amounts in SEKm unless otherwise stated 


Goodwill is reported as an indefinite life intangible asset at cost less accumulated impairment losses.

Product development expenses

Electrolux capitalizes expenses for certain own development of new products provided that the level of certainty of their future economic benefits and useful life is high. The intangible asset is only recognized if the product is sellable on existing markets and that resources exist to complete the development. Only expenditures which are directly attributable to the new product’s development are recognized. Capitalized development costs are amortized over their useful lives, between 3 and 5 years, using the straight-line method.

Computer software

Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized over useful lives, between 3 and 5 years, using the straight-line method with the exception for the development costs of the Group’s common business system, which amortization is based on the usage and go-live dates of the entities and continues over useful life. The applied principle gives an amortization period of approximately 10 years for the system.


Trademarks are reported at historical cost less amortization and impairment. The Electrolux trademark in North America, acquired in 2000, is regarded as an indefinite life intangible asset and is not amortized. One of the Group’s key strategies is to develop Electrolux into the leading global brand within the Group’s product categories. This acquisition gave Electrolux the right to use the Electrolux brand worldwide, whereas it previously could be used only outside of North America. The total carrying amount for the Electrolux brand is SEK 410m, included in the item Other in the table on page 114. All other trademarks are amortized over their useful lives, estimated to 5 to 10 years, using the straight-line method.

Customer relationships

Customer relationships are recognized at fair value in connection with acquisitions. The values of these relationships are amortized over the estimated useful lives, between 5 and 15 years, using the straight-line method.

Intangible assets with indefinite useful lives

Goodwill as at December 31, 2015, had a total carrying value of SEK 5,200m. The allocation, for impairment-testing purposes, on cash-generating units of the significant amounts is shown in the table below.

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. The cash-generating units equal the business areas.

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, prices for raw material and components, 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. 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 2015 were for the main part within a range of 7.1 (7.4) to 15.9 (16.2) %. For the calculation of the in-perpetuity value, Gordon’s growth model is used. According to Gordon’s model, the terminal value of a growing cash flow is calculated as the starting cash flow divided by cost of capital less the growth rate. Cost of capital less growth has been assumed at 6.7% (6) for all markets. This corresponds to a weighted average cost of capital for the Group of 12.2% (11) less an average nominal growth rate of 5.5% (5). The cost of capital and growth rate are estimated to be higher than the average in emerging markets and lower in developed markets. However, the resulting difference is assumed to be equal in all markets over time.

Sensitivity analyses have been carried out based on a reduction of the operating margin by 0.5 percentage points (equivalent to a reduction in budgeted operating income of approximately 10 percent) and by an increase in the cost of capital by one percentage point respectively. None of the sensitivity analyses lead to a reduction of the recoverable amount below the carrying amount for any of the cash generating units, i.e. the hypothetical changes in key assumtions would not lead to any impairment. The calculations are based on management’s assessment of reasonably possible adverse changes in two key assumptions (operating margin and cost of capital), yet they are hypothetical and should not be viewed as an indication that these factors are likely to change. The sensitivity analyses should therefore be interpreted with caution.

Goodwill, value of trademark and discount rate

  2014 2015
  Goodwill  Electrolux
rate, % 
Goodwill  Electrolux
rate, % 
Major Appliances Europe, Middle East and Africa 1,916 16.2 1,883 15.9
Major Appliances North America 428 410 7.4 462 410 7.1
Major Appliances Latin America 1,340 14.9 1,124 14.5
Major Appliances Asia/Pacific 1,385 8.1 1,360 8.2
Other 281 9.6-10.3 371 9.8-11.1
Total 5,350 410   5,200 410  


Goodwill and other intangible assets

Other intangible assets
  Goodwill Product
Other Total other intangible assets Trademarks, program software, etc.
Acquisition costs            
Opening balance, January 1, 2014 4,875 3,032 2,927 2,109 8,068 2,335
Acquired during the year 238 22 260
Acquisition of operations 33 26 26
Internally developed 355 52 407 220
Reclassification –8 11 –3
Fully amortized –469 –11 –136 –616
Write-off –23 –8 –31
Exchange-rate differences 442 275 153 101 529
Closing balance, December 31, 2014 5,350 3,162 3,362 2,119 8,643 2,555
Acquired during the year 240 57 297 64
Acquisition of operations 140 –26 –26
Internally developed 359 14 373 195
Reclassification –1 1
Fully amortized –326 –38 –157 –521
Write-off –16 –13 –1 –30
Exchange-rate differences –290 –171 1 –121 –291 –7
Closing balance, December 31, 2015 5,200 3,008 3,565 1,872 8,445 2,807
Accumulated amortization            
Opening balance, January 1, 2014 1,971 1,326 760 4,057 1,121
Amortization for the year 397 489 139 1,025 293
Fully amortized –469 –11 –136 –616
Exchange-rate differences 166 86 47 299
Closing balance, December 31, 2014 2,065 1,890 810 4,765 1,414
Amortization for the year 349 467 159 975 271
Fully amortized –326 –38 –157 –521
Write-off 7 7
Exchange-rate differences –116 –3 –63 –182 –2
Closing balance, December 31, 2015 1,979 2,316 749 5,044 1,683
Carrying amount, December 31, 2014 5,350 1,097 1,472 1,309 3,878 1,141
Carrying amount, December 31, 2015 5,200 1,029 1,249 1,123 3,401 1,124

Included in the item Other are trademarks of SEK 570m (644) and customer relationships etc. amounting to SEK 553m (665). Amortization of intangible assets is included within Cost of goods sold with SEK 410m (431), Administrative expenses with SEK 401m (435) and Selling expenses with SEK 164m (159) in the income statement. Electrolux did not capitalize any borrowing costs during 2015 or 2014.