19 Intangible assets

EUR 1,000 Goodwill Intagible rights Other capitalised expenditure Advance payments Total
Acquisition cost, 1 Jan 2014 80,100 23,779 18,362 7,911 130,153
Translation difference -952 -161 -471
-1,585
Increases
146 1 5,089 5,236
Disposals
-593 -2,471 -3,107 -6,171
Discontinued operations -25,302 -3,761 -1,337
-30,400
Transfers between items
11,994 -2,641 -9,352
Acquisition cost, 31 Dec 2014 53,846 31,404 11,443 541 97,234






Accumulated amortisation and impairment, 1 Jan 2014
-9,192 -11,627
-20,819
Translation difference
54 303
357
Accumulated amortisation on disposals
509 2,462
2,971
Discontinued operations
1,296 759
2,055
Transfers between items
-601 653
52
Amortisation for the financial year from continuing operations
-5,312 -1,087
-6,399
Amortisation for the financial year from discontinued operations
-112 -41
-153
Impairment
-1,270

-1,270
Accumulated amortisation and impairment, 31 Dec 2014
-14,628 -8,579
-23,206






Carrying amount, 31 Dec 2014 53,846 16,776 2,864 541 74,027
Carrying amount, 1 Jan 2014 80,100 14,588 6,735 7,911 109,334









EUR 1,000 Goodwill Intagible rights Other capitalised expenditure Advance payments Total
Acquisition cost, 1 Jan 2013 77,043 11,653 18,053 10,934 117,684
Translation difference -1,813 -18 -795
-2,626
Increases
660 425 7,810 8,895
Increases from acquired businesses 5,396 2,173 678
8,247
Disposals -526 -378
-1,144 -2,048
Transfers between items
9,689
-9,689
Acquisition cost, 31 Dec 2013 80,100 23,779 18,362 7,911 130,153






Accumulated amortisation and impairment, 1 Jan 2013
-5,536 -8,433
-13,969
Translation difference
6 399
405
Accumulated depreciation on increases

-50
-50
Accumulated amortisation on disposals
324

324
Amortisation for the financial year from continuing operations
-3,894 -3,251
-7,146
Amortisation for the financial year from discontinued operations
-91 -292
-383
Accumulated amortisation and impairment, 31 Dec 2013
-9,192 -11,627
-20,819





Carrying amount, 31 Dec 2013 80,100 14,588 6,735 7,911 109,334
Carrying amount, 1 Jan 2013 77,043 6,117 9,620 10,934 103,714

At the end of 2014, other capitalised expenditure included EUR 9.5 million (EUR 9.2 mill.) and advance payments EUR 0.4 million (EUR 5.5 mill.) capitalised computer software development costs.

The company recorded an impairment of EUR 1.2 million to infrastructure construction segment’s intangible assets in 2014. The impairment was recorded to a land use right located in Sweden which was initially measured at fair value in connection to an acquisition of a subsidiary. The fair value of the land use right has been measured based on its value in use.

Goodwill

At the date of acquisition, goodwill is allocated to cash-generating units, or groups of cash-generating units, that are expected to benefit from synergies arising from the business combination. The company’s business was organised into four operating segments at the beginning of 2014 and later into three operating segments at the beginning August. In connection with the reorganisation at the beginning of the year the company reallocated the goodwill previously subject to Baltic Rim region paving and mineral aggregates operations (common to segment in the table) to country level. In addition, the goodwill decreased by EUR 25.2 million due to the divestment of the company technical building services business during 2014.

Goodwill by segment

EUR 1,000
Finland Other Nordic countries Baltic states and Russia Market areas, total Discount rate, % (pre-tax WACC)
31 Dec 2014





Infrastructure construction
6,158 34,024 6,880 47,062 9.4 *
Building construction, Finland
6,196

6,196 8.6
Russian operations


587 587 17.6

12,354 34,024 7,467 53,846









EUR 1,000 Finland Other Nordic countries Baltic states and Russia Other countries Market areas, total **Common to segment Total Discount rate, % (pre-tax WACC)
31 Dec 2013


International operations
17,066 1,909 139 19,114 23,469 42,583 8.3 *
Building construction 6,196


6,196
6,196 6.7
Infrastructure construction 6,158


6,158
6,158 7.1
Technical building services 25,164


25,164
25,164 7.1
37,518 17,066 1,909 139 56,632 23,469 80,100

* Country-specific sales-weighted average

** The goodwill reported in the ”Common to segment” column has arisen from the asphalt business acquisitions in Denmark and Norway. It is allocated to the International Operations' Baltic Rim region paving and mineral aggregates cash generating unit. This goodwill has been tested for impairment at the level of the whole International Operations' Baltic Rim region paving and mineral aggregates cash generating unit. In addition, the goodwill allocated to each business area has been tested separately for each country.

Goodwill impairment tests

Goodwill is tested for impairment annually and whenever there are indications of possible impairment. The tests are carried out as value-in-use calculations of individual businesses in accordance with the smallest cash-generating unit principle. In impairment testing the discounted present value of the recoverable cash flows of each cash-generating unit is compared with the carrying amount of the unit in question. If the present value is lower than the carrying amount, the difference is recognised through profit or loss as an expense in the current year.

The goodwill impairment tests carried out during the third quarter of 2014, showed that the present values of the future cash flows exceed the carrying amounts in all business units. The company carried out a goodwill re-testing for Finland’s Building Construction at end of 2014. Based on the tests, there was no need for impairment of goodwill in 2014.

Forecasts and key assumptions used in goodwill impairment testing

Cash generating units’ cash flow forecasts are prepared for a four year planning period based on management estimates based on actual past performance. Main assumptions used in the preparation of the cash flow forecasts are the growth of the market in question, the company’s profitability development as well as measures which the company has committed to.

Main assumptions in the goodwill impairment testing are long term growth and discount rate. Cash flow forecasts beyond the four year (five years in 2013) planning period are based on the assumption of 1 percent annual growth which was lower than European Central Bank's target inflation rate over medium term in effect at the time of the impairment testing. Weighted Average Cost of Capital (WACC), calculated for each individual unit, is used as the discount factor. WACC takes into account risk-free interest rate, illiquidity premium, expected market rate of return, the industry’s beta value, country risk and the debt interest rate including interest rate margin. These components are weighted according to average target capital structure of the sector. Pre-tax WACC is determined separately for each tested unit.

Sensitivity analysis

In connection with the impairment tests, sensitivity analyses are made to determine how possible changes in key assumptions of the unit-specific impairment tests would affect the results of those tests. The key assumptions affecting the present value of cash flows are the development of market and competitive conditions, and the discount factor. In the sensitivity analyses the calculation variables affecting these assumptions are varied and the effects of the changes on the margin between the carrying value and present value of the cash flows are examined.

The majority of the company’s goodwill is subject to the Infrastructure construction operating segment. Sensitivity analysis prepared in 2014 show that reasonable and ordinary variation to key assumptions used in the testing would not cause a need for impairment in the Infrastructure construction operating segment. Neither does the goodwill subject to other Nordic countries, the Baltics or the Russia operations include a risk of impairment, according to the sensitivity analysis. The most significant risk for impairment of goodwill arises from the Building construction, Finland -operating segment where the unit’s recoverable cash flow exceeds the unit’s carrying amount by EUR 0.0 million. The pronounced risk is a result of the weak general economic situation in Finland that appears in the demand for housing and commercial construction. Sensitivity analysis show that an increase in the discount rate or decrease in the long term annual growth rate would cause an impairment of goodwill in the Building construction, Finland -operating segment.

Figures describing the goodwill impairment risk of units subject to impairment testing by business segment are presented below.

EUR 1,000 Infrastructure construction Building construction, Finland Russian operations
2014



Goodwill allocated to the business sector, total
47,062 6,196 587
Ratio of present value to carrying amount *
3.63 1.00 1.34
Goodwill impairment if annual growth over the




long term were 1 percentage point lower
0 6,196 0

long term were 2 percentage points lower
0 6,196 0
Goodwill impairment if the discount rate




were half a percentage point higher
0 6,196 0

were one percentage point higher
0 6,196 0






EUR 1,000 International operations Building construction Infrastructure construction Technical building services
2013



Goodwill allocated to the business sector, total 42,583 6,196 6,158 25,164
Ratio of present value to carrying amount * 3.79 1.50 3.81 1.96
Goodwill impairment if annual growth over the




long term were 1 percentage point lower 0 0 879 0

long term were 2 percentage points lower 0 0 879 0
Goodwill impairment if the discount rate




were half a percentage point higher 0 0 879 0

were one percentage point higher 0 0 879 0

* Net-sales-weighted average of the business sector’s cash-generating units subject to impairment testing. Ratio less than one would result in an impairment.


 
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