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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 goodwill related to the acquisitions of Respironics for EUR 2,162 million, Genlyte for EUR 1,024
million, VISICU for EUR 175 million, and several smaller acquisitions. Acquisitions in 2007 include goodwill related to the
acquisitions of Partners in Lighting for EUR 297 million and Color Kinetics for EUR 358 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 businesses:
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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 39) 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 cash-generating unit (typically 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 pre-tax discount rates for Home Healthcare
Solutions, Professional Luminaires and Imaging Systems were 12.2%, 14.0% and 10.5%, respectively and the growth rate cap applied
to the terminal value was 2.7%.
The trigger-based tests resulted in goodwill impairment charges of EUR 301 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 the
Information by sector and main country for a specification of goodwill by sector.
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