CDON Group Annual Report 2010

Annual Report 2010

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Note 9 Intangible assets

Group          
Internally developed intangible assets          
Development expenses       2010 2009
Opening accumulated cost       26 790 25 226
Investments       1 651 1 564
Reclassifications       -16 535 -
Closing accumulated acquisition value       11 906 26 790
           
Opening accumulated amortisation       -2 967 -997
Year's amortisation       -2 072 -1 970
Reclassifications       140 -
Closing accumulated amortisation       -4 899 -2 967
           
Carrying amount       7 007 23 823
           
This item refers to costs for the Group’s web platform.
Amortisation expenses of SEK 2,072 thousand (1,970) are included in sales & administrative expenses.
Only external expenses have been capitalised. No loan expenses have been capitalised.
Domains       2010 2009
Opening accumulated cost       - -
Investments       540 -
Reclassifications       643 -
Closing accumulated acquisition value       1 182 -
           
Opening accumulated amortisation       - -
Year's amortisation       -194 -
Reclassifications       -263 -
Closing accumulated amortisation       -457 -
           
Carrying amount       726 -
           
The item refers to expenses to register and maintain the company’s internet domains.
Amortisation expenses of SEK 194 thousand (0) are included in sales & administrative expenses.
Only external expenses have been capitalised. No loan expenses have been capitalised.
Acquisition of intangible assets          
Trademarks       2010 2009
Opening accumulated cost       44 508 44 508
Investments       5 138 -
Reclassifications       4 388 -
Closing accumulated acquisition value       54 034 44 508
           
Opening accumulated amortisation       -5 635 -2 695
Year's amortisation       - -2 940
Reclassifications       5 635 -
Closing accumulated amortisation       - -5 635
           
Carrying amount       54 034 38 873
           
The item refers to trademarks for Gymgrossisten and Lekmer.
Amortisation expenses of SEK 0 thousand (2,940) are included in sales & administrative expenses.
Customer relationships       2010 2009
Opening accumulated cost       - -
Investments       1 171 -
Reclassifications       11 504 -
Closing accumulated acquisition value       12 675 -
           
Opening accumulated amortisation       - -
Year's amortisation       -3 052 -
Reclassifications       -5 512 -
Closing accumulated amortisation       -8 564 -
           
Carrying amount       4 111 -
           
The item refers to identifiable customer relationships from the acquisitions of Gymgrossisten Sweden AB and Lekmer AB.
Amortisation expenses of SEK 3,052 thousand (0) are included in sales & administrative expenses.
Goodwill       2010 2009
Opening accumulated cost       189 865 184 895
Investments       4 764 6 264
Additional acquisition expenses       687 -
Other       -3 225 -
Translation differences       -3 125 -1 294
Closing accumulated acquisition value       188 966 189 865
           
Carrying amount       188 966 189 865
           
Goodwill refers to goodwill that originated from the acquisition of Gymgrossisten Sweden AB, Lekmer AB, NLY Scandinavia AB, and Linus&Lotta Postorder AB.
Impairment testing for cash-generating units containing goodwill  
The following cash-generating units, which coincide with the Group’s reporting segments, recognise significant goodwill values in relation to the Group’s total recognised goodwill value:
(SEK thousands)       2010 2009
Sports & Health       139 940 139 256
Entertainment       24 969 23 325
Fashion       24 057 27 284
Total       188 966 189 865
           
Impairment testing  
Impairment testing for goodwill for cash-generating units in the segment is based on recoverable value (value in use), calculated using a discounted cash flow model. The model includes terminal value, market growth rate, and working capital requirements. These cash flow projections calculated over a five year period are based on actual operating results, forecasts and financial projections, historical trends, general market conditions, industry trends, and other available information.
Cash flow projections are based on a sustainable growth rate that is individually calculated based on the each unit’s outlook. Individual assumptions are also made on expenses and capital turnover development. The cash flow is discounted for each unit using an appropriate discount rate, taking into consideration the cost of capital and risk, and with individual consideration taken only in special circumstances. The cash flow calculated for each segment after the first five years was based on an annual growth rate of 2.5%. The calculated cash flow has been calculated at present value at a discount rate of 9.3% before tax.
Sensitivity  
The impairment testing performed does not indicate any need to take an impairment loss. Impairment testing generally has a margin such that any adverse changes in individual parameters reasonably possible would not cause the value in use to fall below the book value. However, the cash flow projections are uncertain and may also be influenced by factors not in control by the company. Even if the estimated growth rate applied after the forecasted 5-year period had been 1.5% instead of the management estimate of 2.5%, there would be no need to recognise an impairment loss for goodwill. Even if the estimated discount rate for tax applied for discounted cash flows had been 10.3% instead of the management estimate of 9.3%, there would be no need to recognise an impairment loss on goodwill.
Impairment testing for cash-generating units containing trademarks  
The following cash-generating units, which coincide with the Group’s reporting segments, recognise significant values for trademarks in relation to the Group’s total recognised value for trademarks:
(SEK thousands)       2010 2009
Sports & Health       48 896 38 873
Entertainment       5 138 -
Total       54 034 38 873
           
Impairment testing  
Impairment testing for trademarks for cash-generating units in the segment is based on recoverable value (value in use), calculated using a discounted cash flow model. The model includes terminal value, market growth rate, and working capital requirements. These cash flow projections calculated over a five year period are based on actual operating results, forecasts and financial projections, historical trends, general market conditions, industry trends, and other available information.
Cash flow projections are based on a sustainable growth rate that is individually calculated based on the each unit’s outlook. Individual assumptions are also made on expenses and capital turnover development. The cash flow is discounted for each unit using an appropriate discount rate, taking into consideration the cost of capital and risk, and with individual consideration taken only in special circumstances. The cash flow calculated for each segment after the first five years was based on an annual growth rate of 2.5%. The calculated cash flow has been calculated at present value at a discount rate of 9.3% before tax.
Sensitivity  
The impairment testing performed does not indicate any need to take an impairment loss. Impairment testing generally has a margin such that any adverse changes in individual parameters reasonably possible would not cause the value in use to fall below the book value. However, the cash flow projections are uncertain and may also be influenced by factors not in control by the company. Even if the estimated growth rate applied after the forecasted 5-year period had been 1.5% instead of the management estimate of 2.5%, there would be no need to recognise an impairment loss for trademarks. Even if the estimated discount rate for tax applied for discounted cash flows had been 10.3% instead of the management estimate of 9.3%, there would be no need to recognise an impairment loss on trademarks.

CDON Group AB, P.O. Box 385, Bergsgatan 20 (visiting address), SE-201 23 Malmö, Sweden