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The changes in 2007 and 2008 were as follows:
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Amortization / Impairments
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Balance as of December 31:
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Amortization / Impairments
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Acquisitions in 2008 include the goodwill paid on the acquisition of Respironics for EUR 2,162 million, Genlyte for EUR 1,036
million, and VISICU for EUR 175 million, and several smaller acquisitions. Acquisitions in 2007 include the goodwill paid
on the acquisition of Partners in Lighting for EUR 297 million, Color Kinetics for EUR 357 million and several smaller acquisitions.
In addition, goodwill changed due to the finalization of purchase price accounting related to acquisitions in prior years.
A significant part of goodwill is allocated to the following reporting units:
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Home Healthcare Solutions
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Home Healthcare Solutions and Professional Luminaires increased by the acquisitions of Respironics and Genlyte, respectively
(see note 2) and are the most sensitive to fluctuations in the key assumptions used in the impairment tests as set out below.
The key assumptions used in the annual (performed in Q2) and trigger-based impairment tests were growth of sales and gross
margin, together with the rates used for discounting the forecast cash flows. Sales and gross margin growth are based on
management’s internal forecasts that cover an initial period of no more than five years and then are extrapolated with stable
or declining growth rates, after which a terminal value is calculated for which growth rates are capped. The pre-tax discount
rates are determined for each reporting unit (one level below sector level) and, in the annual test, ranged from 9.4% to 15.6%.
Due to deteriorating economic circumstances, and the decline of the market capitalization of the company, trigger-based impairment
tests were performed in the latter half of the year using updated assumptions. The trigger-based tests resulted in goodwill
impairment charges of EUR 234 million, mainly related to Lumileds as a consequence of weaker demand for LED solutions in the
automotive, display and cell phone markets. The pre-tax discount rate used for the Lumileds impairment test was 14.6%.
Please refer to
Information by sector and main country for a specification of goodwill by sector.
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