a. Intangible Assets
Intangible assets are accounted for at acquisition cost. After initial recognition, intangible assets are accounted for at cost less accumulated amortization and any accumulated impairment losses. Intangible assets are amortized on a straight-line basis over the best estimate of their useful lives. The amortization period and the amortization method are reviewed annually at each financial year-end.
Concessions, industrial rights and similar rights and values
Amounts paid for concessions, industrial rights and similar rights and values are capitalized and then amortized on a straight-line basis over the expected useful life. The expected useful lives vary from 3 to 15 years.
Business combinations and goodwill
For business combinations and goodwill, IFRS 3 has been applied. According to this standard, goodwill is measured as the residual cost of the business combination after recognizing the acquiree’s identifiable assets, liabilities and contingent liabilities. From 2005 on, any goodwill arising from business combinations is no longer amortized. Goodwill is tested for impairment in accordance with IAS 36 at least annually, or more frequently if events or changes in circumstances indicate that it might be impaired. In determining whether an impairment write-down is required, goodwill is allocated to the cash-generating units that are expected to benefit from the synergies of the business combination. If the carrying amount exceeds the value in use that is calculated by using a Discounted Cash-Flow (DCF) calculation an impairment loss is recognized. An impairment loss recognized for goodwill will not be reversed in a subsequent period.
Future payment surpluses are based on internal forecasts, which are prepared in detail for the next business year and with simplifications for the following two years, and reflect the historical performance and management’s best estimates about future developments. After this detailed planning horizon a constant level is assumed, if no grave reasons speak against it. The discount rate used for DCF calculation is based on an interest rate which represents actual assessment of possible changes of exchange rates as well as specific risks of an asset. Under consideration of the applicable currency and the corresponding risk profile, a discount rate between 10.36% and 11.01% was applied.
Substantial goodwill was allocated at the acquisition date to existing cash-generating units of Andritz AG (1999), of the Pulp Business acquired through the Andritz-Ahlstrom Group (2000/2001) as well as of the VA TECH HYDRO Group in the Hydro Power Business Area (2006).
After reassessment of the identification and the measurement of the acquirees’ identifiable assets, liabilities and contingent liabilities and the measurement of cost of the combination, any negative goodwill is recognized in profit or loss immediately.