19 Intangible assets

EUR million Goodwill Intangible
rights
Other capitalised
expenditure
Advance payments Total
Cost, 1 Jan 2015 53.8 31.4 11.4 0.5 97.2
Translation difference -0.8 0.0 -0.3
-1.1
Increases 0.1 0.1
0.7 0.9
Disposals -0.1 -0.2 -3.4
-3.7
Transfers between items
1.1 -0.1 -1.1 -0.2
Cost, 31 Dec 2015 53.1 32.3 7.7 0.1 93.2






Accumulated amortisation and impairment, 1 Jan 2015
-14.6 -8.6
-23.2
Translation difference
0.0 0.3
0.2
Accumulated amortisation on disposals
0.1 3.4
3.4
Transfers between items
0.0 0.0
0.0
Amortisation for the financial year
-5.2 -1.0
-6.2
Impairment
-0.4

-0.4
Accumulated amortisation and impairment, 31 Dec 2015
-20.1 -6.0
-26.1






Carrying amount, 31 Dec 2015 53.1 12.2 1.7 0.1 67.1
Carrying amount, 1 Jan 2015 53.8 16.8 2.9 0.5 74.0







EUR million Goodwill Intangible
rights
Other capitalised
expenditure
Advance payments Total
Cost, 1 Jan 2014 80.1 23.8 18.4 7.9 130.2
Translation difference -1.0 -0.2 -0.5
-1.6
Increases
0.1 0.0 5.1 5.2
Disposals
-0.6 -2.5 -3.1 -6.2
Discontinued operations -25.3 -3.8 -1.3
-30.4
Transfers between items
12.0 -2.6 -9.4
Cost, 31 Dec 2014 53.8 31.4 11.4 0.5 97.2






Accumulated amortisation and impairment, 1 Jan 2014
-9.2 -11.6
-20.8
Translation difference
0.1 0.3
0.4
Accumulated amortisation on disposals
0.5 2.5
3.0
Discontinued operations
1.3 0.8
2.1
Transfers between items
-0.6 0.7
0.1
Amortisation for the financial year from continuing operations
-5.3 -1.1
-6.4
Amortisation for the financial year from discontinued operations
-0.1 0.0
-0.2
Impairment
-1.3

-1.3
Accumulated amortisation and impairment, 31 Dec 2014
-14.6 -8.6
-23.2







Carrying amount, 31 Dec 2014 53.8 16.8 2.9 0.5 74.0
Carrying amount, 1 Jan 2014 80.1 14.6 6.7 7.9 109.3

In 2015, the company recorded EUR 0.4 million (1.3) impairment related to the Paving segment’s land use rights.

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 2015. The reportable new operating segments correspond to the business based management model. Furthermore, the operating segments are the lowest level at which the company management monitors goodwill and the level on which the goodwill is tested. Before the segment change goodwill was monitored at country level.

Goodwill by segment

EUR million
Goodwill Discount rate, %
(pre-tax WACC)
31 Dec 2015

Paving
43.1 8.2*
Infra projects
3.2 7.8*
Building construction, Finland
6.2 6.6
Russian operations
0.6 23.2

53.1




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








Infrastructure construction 6.2 34.0 6.9 47.1 9.4**
Building construction, Finland 6.2

6.2 8.6
Russian operations


0.6 0.6 17.6

12.4 34.0 7.5 53.8
* Country-specific operating capital-weighted average
** Country-specific sales-weighted average












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 fourth quarter of 2015, showed that the present values of the future cash flows exceed the carrying amounts in all segments.

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 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 debt interest rate including interest rate margin calculated for each unit. When determining the debt interest rate level in 2015, the company took into account the following segment-specific interest rate levels: interest rate levels for project loans in building construction in Finland as well as interest rate levels for finance lease liabilities related to paving and infra projects business operations. The components of discount factor are weighted according to average target capital structure of the sector. Pre-tax WACC is determined separately for each tested unit. In the calculation of the segment-specific discount rates in 2015, the company used country-specific discount rates that were weighted with country-specific operating capital.

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.

Sensitivity analysis prepared in 2015 shows that reasonable and ordinary variation to key assumptions used in the testing would not cause a need for impairment in Paving, Infra projects nor Russian operations segments. 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 37.1 million.

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

EUR million Paving Infra
projects
Building construction, Finland Russian operations
2015



Goodwill allocated to the business sector, total 43.1 3.2 6.2 0.6
Goodwill impairment if annual growth over the




long term were 1 percentage point lower 0.0 0.0 0.0 0.0

long term were 2 percentage points lower 0.0 0.0 6.2 0.0
Goodwill impairment if the dicount rate




were half a percentage point higher 0.0 0.0 0.0 0.0

were one percentage point higher 0.0 0.0 6.2 0.0






EUR million
Infrastructure construction Building construction, Finland Russian operations
2014



Goodwill allocated to the business sector, total
47.1 6.2 0.6
Goodwill impairment if annual growth over the




long term were 1 percentage point lower
0.0 6.2 0.0

long term were 2 percentage points lower
0.0 6.2 0.0
Goodwill impairment if the dicount rate




were half a percentage point higher
0.0 6.2 0.0

were one percentage point higher
0.0 6.2 0.0