11. Goodwill and intangible assets

Goodwill and intangible assets from acquisitions with an indefinite useful life are tested for impairment on an annual basis. The following table lists the carrying amounts and parameters of the items that are material for the Group.

Goodwill

The discounted cashflow method is applied to test the goodwill for impairment. The Group bases the impairment test on the results from the current business plan (four-year period) and the assumptions in this plan regarding price, market and market share developments. Growth rates after the end of the planning period are based on Euroconstruct forecasts and the Group’s own assumptions drawn from past experience regarding price and market share trends. A discount rate based on the Group’s weighted cost of capital is used to calculate the discounted future cashflows. Management regards the discount rate, growth rates and development of the operating margin as the key factors in calculating the recoverable amount. The annual impairment test did not produce any evidence of impairment.

Trademarks

The Geberit brand is an integral part of the Geberit business model and is assumed to have an indefinite useful life. Impairment is tested using the “relief from royalty” method. Impairment is tested against the Group’s estimated net sales attributable to the trademark according to the current business plan (four-year period). Growth rates after the end of the planning period are based on Euroconstruct forecasts and the Group’s own assumptions drawn from past experience regarding price and market share trends. A discount rate based on the Group’s weighted cost of capital is used to discount future cashflows. The annual impairment test did not produce any evidence of impairment.

The item “Various trademarks (indefinite useful life)” includes the trademarks Ifö and IDO in 2022 and these trademarks are assumed to have an indefinite useful life. The “relief from royalty” method is used as well to test these trademarks and the test is based on the current business plan and the growth rates are defined in the same way as for the Geberit brand. Discounted future cashflows are calculated using discount rates based on the Group’s weighted cost of capital taking into account country- and currency-specific risks. The annual impairment tests produced evidence of impairment for one brand. An impairment of MCHF 4.4 was recognised and it was mainly due to an increased discount rate.

The item “Various trademarks (definite useful life)” includes the trademarks Keramag, Allia, Sphinx, Twyford and Kolo in 2022 (change of Kolo brand from indefinite to definite useful life as at 1 April 2022). These trademarks have been integrated within the Geberit brand in the last years. For this reason, they are assumed to have a definite useful life. This means that each individual trademark is amortised over its remaining useful life. Total annual amortisation recognised on these trademarks amounts to MCHF 10.7 (PY: MCHF 9.8).

Sensitivity analysis

The sensitivity analysis shows that changes to the key assumptions (discount rate +1.0 percentage point or growth rate -1.0 percentage point or operating margin -1.0 percentage point) that are realistically possible from today’s perspective would not result in an impairment of goodwill. However, in the case of one trademark, this would lead to an impairment loss in total of between MCHF 2–3.