18 Intangible assets and goodwill
18.1 Overview
CHF 1,000 | Software | Development costs | Acquired client relationships | Goodwill | Total 2013 |
At cost |
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Balance at January 1, 2013 | 23,238 | 13,176 | 724 | 26,788 | 63,926 |
Internally developed | 2,332 | 10,248 | – | – | 12,580 |
Disposal | (193) | – | – | – | (193) |
Translation differences | – | – | (118) | 23 | (95) |
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Balance at December 31, 2013 | 25,377 | 23,424 | 606 | 26,811 | 76,218 |
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Accumulated amortization and impairment losses |
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Balance at January 1, 2013 | 18,538 | 5,421 | 103 | – | 24,062 |
Annual amortization | 1,123 | 2,584 | 98 | – | 3,805 |
Impairment losses | – | – | – | – | – |
Disposal | (193) | – | – | – | (193) |
Translation differences | – | – | (27) | – | (27) |
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Balance at December 31, 2013 | 19,468 | 8,005 | 174 | – | 27,647 |
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Net book value | 5,909 | 15,419 | 432 | 26,811 | 48,571 |
CHF 1,000 | Software | Development costs | Acquired technology | Acquired client relationships | Acquired | Goodwill | Total 2014 |
At cost |
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Balance at January 1, 2014 | 25,377 | 23,424 | – | 606 | – | 26,811 | 76,218 |
Acquisition through business combination | – | 151 | 4,640 | 6,867 | 1,009 | 21,344 | 34,011 |
Internally developed | 1,091 | 16,222 | – | – | – | – | 17,313 |
Translation differences | – | (2) | (44) | 22 | (11) | (224) | (259) |
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Balance at December 31, 2014 | 26,468 | 39,795 | 4,596 | 7,495 | 998 | 47,931 | 127,283 |
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Accumulated amortization and impairment losses |
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Balance at January 1, 2014 | 19,468 | 8,005 | – | 174 | – | – | 27,647 |
Annual amortization | 1,231 | 2,342 | 193 | 259 | 43 | – | 4,068 |
Impairment losses | – | – | – | – | – | – | – |
Translation differences | 1 | – | (2) | – | (1) | – | (2) |
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Balance at December 31, 2014 | 20,700 | 10,347 | 191 | 433 | 42 | – | 31,713 |
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Net book value | 5,768 | 29,448 | 4,405 | 7,062 | 956 | 47,931 | 95,570 |
The amortization charge is recognized in the following line items of the statement of profit or loss:
CHF 1,000 | 2013 | 2014 |
Cost of sales | – | - |
Sales and marketing | 98 | 302 |
Research and development | 2,584 | 2,535 |
General and administration | 1,123 | 1,231 |
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Total amortization | 3,805 | 4,068 |
18.2 Impairment tests
For the purpose of impairment testing, goodwill is allocated to a cash-generating unit or to a group of cash-generating units that are expected to benefit from the synergies of the corresponding business combination. Subsequently, the recoverable amount of the cash-generating unit (higher of fair value less costs of disposal and value in use) is compared to its carrying amount. An impairment loss is only recognized if the carrying amount of the cash-generating unit exceeds its recoverable amount. Value in use is normally assumed to be higher than the fair value less costs of disposal; therefore, fair value less costs of disposal is only investigated when value in use is lower than the carrying amount of the cash-generating unit. Value in use is calculated according to the DCF-method. The cash flow projections are based on a five-year financial planning period. Cash flows beyond the five-year period are extrapolated applying the estimated long-term growth rates stated below. The expected growth in sales is based on external market studies and internal assessments prepared by management. Future cash flows are discounted using the weighted average cost of capital (WACC). The discount rates applied are pre-tax.
18.2.1 Financial year 2014
The Group performed impairment tests on cash-generating units containing goodwill in December 2014, using the following key assumptions:
Goodwill Cash-generating unit | Method | Carrying amount (CHF 1,000) | Test date | Basis for recoverable amount | Pre-tax | Projection | Long-term |
Goodwill Life Sciences Business Life Sciences Business | DCF-method | 47,931 | December 2014 | Value in use | 7.8 % | 5 years | 0.0 % |
In addition, the Group prepared mandatory impairment tests for capitalized development costs relating to products that are not yet launched on the market, on September 30, 2014.
Based on the impairment tests 2014, there was no need for the recognition of any impairment. Management believes that no reasonably possible change in any of the above key assumptions would cause the carrying amount of the cash-generating unit to materially exceed its recoverable amount.
18.2.2 Financial year 2013
The Group performed impairment tests on cash-generating units containing goodwill in July 2013, using the following key assumptions:
Goodwill Cash-generating unit | Method | Carrying amount (CHF 1,000) | Test date | Basis for recoverable amount | Pre-tax | Projection | Long-term |
Goodwill Life Sciences Business Life Sciences Business | DCF-method | 26,811 | July 2013 | Value in use | 10.6 % | 5 years | 0.0 % |
In addition, the Group prepared mandatory impairment tests for capitalized development costs relating to products that are not yet launched on the market, on September 30, 2013. Based on the impairment tests 2013, there was no need for the recognition of any impairment.