Consolidated Financial Statements >
CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES
204
| 2012 annual report prysmian group
Gross investments in intangible assets amount to Euro 20
million in 2012, and primarily refer to:
• Euro 7 million for development of the SAP Consolidation
project, aimed at standardising the information system
throughout the Group. At 31 December 2012 the new
system had been implemented and was fully operational
in Germany, the Netherlands, Italy, Finland, Hungary,
Romania, Austria, Slovakia, France, Turkey, Spain and
Estonia.
• Euro 8 million for the Brazilian subsidiary’s development of
a prototype destined for flexible pipe production.
During 2012 the Prysmian Group recognised Euro 53 million in
“Goodwill” in connection with the acquisition of the majority
interest in Telcon Fios e Cabos para Telecomuniçaoes S.A. and
of Global Marine Systems Energy Ltd.. Further details can be
found in Section E. Business combinations.
Goodwill impairment test
As reported earlier, the Chief Executive Officer reviews
operating performance by macro type of business (Energy and
Telecom). Goodwill is monitored internally at the Energy and
Telecom operating segment level. The amount of goodwill
allocated to each operating segment is reported in the
following table:
As described earlier, the acquisition of the majority interest in
Telcon Fios e Cabos para Telecomuniçaoes S.A. and of Global
Marine Systems Energy Ltd.. has led to the recognition of Euro
53 million in goodwill during 2012.
In 2011 the acquisition of the Draka Group had led to the
recognition of Euro 352 million in goodwill. This goodwill is
justified by the synergies expected from integrating the two
groups. Based on the predicted realisation of these synergies,
the directors have allocated the goodwill to the two operating
segments.
The amount of goodwill thus allocated (summed with the
remaining portion of the operating segment’s net invested
capital) has been compared with the recoverable amount of
each operating segment, determined on the basis of their value
in use.
Forecast cash flows have been calculated using the post-tax
cash flows expected by management for 2013, prepared on
the basis of results achieved in previous years and the outlook
for the markets concerned. The cash flow forecasts for both
operating segments have been extended to the period 2014-
2015 based on 3% projected growth. A terminal value has been
estimated to reflect CGU value after this period; this value
has been determined assuming a 2% growth rate. The rate
used to discount cash flows has been determined on the basis
of market information about the cost of money and asset-
specific risks (Weighted Average Cost of Capital, WACC). The
test has shown that the recoverable amount of the individual
CGUs is higher than their net invested capital (including the
share of allocated goodwill). In particular, in percentage terms,
recoverable amount exceeds carrying amount by 205% for
the Energy operating segment and by 92% for the Telecom
operating segment. It should be noted that the discount rate
at which recoverable amount is equal to carrying amount is
19% for the Energy operating segment and 14% for the Telecom
operating segment (compared with a WACC of 8.2% used for
both operating segments), while, in order to determine the
same match for growth rates, the growth rate would have to be
negative for both segments.
(in millions of Euro)
31 December 2011
Business combinations 31 December 2012
Energy goodwill
253
49
302
Telecom goodwill
99
4
103
Total goodwill
352
53
405
