Gschäftsbericht 2018

106 | Galenica financial statements 2018 Finance Notes to the consolidated financial statements of the Galenica Group Trademarks with indefinite useful lives This position includes two trademarks with carrying amounts of CHF 21.6 million and CHF 14.9 million (previous year: CHF 21.6 million and CHF 14.9 million) that are well known nationally and internationally and actively advertised. These acquired trademarks are regarded as having indefinite useful lives for the following reasons: they were created many years ago, they do not expire, and the products sold under the trademarks have a history of strong revenue and cash flow perfor- mance. Galenica intends and has the ability to support the trademarks to maintain their values for the foreseeable future. For impairment testing purposes the trademarks have been allocated to the cash-generating unit Verfora (formerly: Vifor Consumer Health) in the Products & Brands business sector. The recoverable amount (higher of fair value less costs of dis- posal and value in use) is determined on the basis of future discounted cash flows. Cash flows beyond the three-year plan- ning period are based on the growth rates and discount rates before tax set out below, as approved in medium-term planning by management: in thousand CHF 2018 2017 Carrying amount 36,528 36,528 Growth rate 1.0% 1.0% Discount rate 6.7% 6.6% According to the results of impairment testing for 2018 and 2017 using value in use calculations, no impairment was neces- sary. Galenica performed a sensitivity analysis taking into account reasonable changes in the assumptions used to calculate the discounted cash flows, such as higher discount rates, lower EBITDA, lower gross margins or lower perpetual growth rates. The sensitivity analysis for 2018 and 2017 did not reveal that a reasonable possible change in assumption would lead to an impairment. Goodwill Accounting principles Goodwill is allocated to the cash-generating unit (CGU) or group of CGUs that are expected to benefit from a business combination. Management monitors goodwill at business sector level. Goodwill is tested for impairment annually, or more frequently if there are indications of impairment. The impairment test is based on the discounted cash flow method. The WACC is used to determine the applicable pre-tax discount rate. The recoverable amount (higher of fair value less costs of disposal and value in use) of each CGU is determined on the basis of the medium-term plans for the next three years approved by management. Cash flows beyond the three-year planning period are extrapolated using a perpetual growth rate. If the recoverable amount is lower than the carrying amount, the carrying amount is reduced to the recoverable amount by recording an impairment charge. Any impairment on goodwill is recognised in profit or loss and disclosed separately. An impairment loss for goodwill is not reversed. in thousand CHF Carrying amount Growth rate 2018 Discount rate Carrying amount Growth rate 2017 Discount rate Products & Brands 26,175 1.0% 6.8% 26,175 1.0% 6.8% Retail 572,886 1.0% 6.7% 514,749 1.0% 6.7% Services 92,412 1.0% 6.8% 92,412 1.0% 6.7% Total 691,473 633,336 According to the results of impairment testing for 2018 and 2017 using value in use calculations, no impairment was neces- sary. Galenica performed a sensitivity analysis taking into account reasonable changes in the assumptions used to calculate the discounted cash flows, such as higher discount rates, lower EBITDA, lower gross margins or lower perpetual growth rates. The sensitivity analysis for 2018 and 2017 did not reveal that a reasonable possible change in assumption would lead to an impairment.