Note 13 - Goodwill and other intangible assets

All amounts in SEKm unless otherwise stated

Intangible assets with indefinite useful lives

Goodwill as at December 31, 2012, has a total carrying value of SEK 5,541m. In addition, the right to use the Electrolux trademark in North America, acquired in 2000, has been assigned an indefinite useful life. The total carrying amount for the right is SEK 410m, included in the item Other below. The allocation, for impairment-testing purposes, on cash-generating units of the significant amounts is shown in the table below.

All intangible assets with indefinite useful lives are tested for impairment at least once every year. Single assets can be tested more often in case there are indications of impairment. The recoverable amounts of the cash-generating units have been determined based on value in use calculations. The cash-generating units equal the business areas.

Value in use is calculated using the discounted cash-flow model and based on a three-year forecast made by Group Management. The forecast is built up from the estimate of the units within each business area. The preparation of the forecast requires a number of key assumptions such as volume, price, product mix, which will create a basis for future growth and gross margin. These figures are set in relation to historic figures and external reports on market growth. The cash flow for the third year is used as the base for the fourth year and onwards in perpetuity. The discount rates used are, amongst other things, based on the individual countries’ inflation, interest rates and country risk. The pre-tax discount rates used in 2012 were for the main part within a range of 8.0 to 16.0%. For the calculation of the in-perpetuity value, Gordon’s growth model is used. According to Gordon’s model, the terminal value of a growing cash flow is calculated as the starting cash flow divided by cost of capital less the growth rate. Cost of capital less growth has been assumed at 6% for all markets. This corres­ponds to a weighted average cost of capital for the Group of 11% less an average nominal growth rate of 5%. The cost of capital and growth rate is estimated to be higher than the average in emerging markets and lower in developed markets. However the resulting difference is assumed to be equal in all markets over time. Management believes that any reasonably possible adverse change in the key assumptions would not reduce the recoverable amount below its carrying amount.

               
Goodwill, value of trademark and discount rate              
    2012      2011    
  Goodwill Electrolux trademark Discount rate, % Goodwill Electrolux trademark Discount rate, %  
Major Appliances Europe, Middle East and Africa 1,828 — 14.1 1,971 — 12.9  
Major Appliances North ­America 358 410 9.6 379 410 9.5  
Major Appliances Asia/Pacific 1,434 — 9.1 1,488 — 9.7  
Major Appliances Latin ­America 1,631 — 16.0 1,873 — 15.8  
Other 290 — 8.0–11.3 297 — 8.7–10.9  
Total 5,541 410 — 6,008 410 —  
               
Goodwill and other intangible assets
    Group Other intangible assets   Parent Company
  Goodwill Product development Program software Other Total other intangible assets   Trademarks, software etc.
Acquisition costs               
Opening balance, January 1, 2011 2,295 2,443 2,156 1,012 5,611   2,283
Acquired during the year — — 84 11 95   —
Acquisition of operations 3,599 — 46 1,482 1,528   —
Internally developed — 374 660 — 1,034   402
Reclassification — — 3 –3 —   —
Fully amortized — –264 –30 –32 –326   –3
Write-off — –11 –14 –6 –31   —
Exchange-rate differences 114 –34 –18 11 –41   —
Closing balance, December 31, 2011 6,008 2,508 2,887 2,475 7,870   2,682
Acquired during the year — — 88 2 90   —
Acquisition of operations –104 — — –57 –57   —
Internally developed — 477 486 — 963   266
Reclassification — –24 9 15 —   —
Fully amortized — –57 –11 –19 –87   —
Write-off — –19 — — –19   —
Exchange-rate differences –363 –148 –41 –103 –292   —
Closing balance, December 31, 2012 5,541 2,737 3,418 2,313 8,468   2,948
               
Accumulated amortization               
Opening balance, January 1, 2011 — 1,237 571 527 2,335   653
Amortization for the year — 420 268 65 753   204
Fully amortized — –264 –30 –32 –326   –3
Exchange-rate differences — –17 –1 –20 –38   —
Closing balance, December 31, 2011 — 1,376 808 540 2,724   854
Amortization for the year — 439 275 175 889   162
Fully amortized — –57 –11 –19 –87   —
Exchange-rate differences — –79 –21 –37 –137   —
Closing balance, December 31, 2012 — 1,679 1,051 659 3,389   1,016
Carrying amount, December 31, 2011 6,008 1,132 2,079 1,935 5,146   1,828
Carrying amount, December 31, 2012 5,541 1,058 2,367 1,654 5,079   1,932

Goodwill and Other intangibles reported as Acquisition of operations refers to the finalization of the acquisition-cost allocation for the CTI Group acquisition made in 2011. For additional information, see Note 26. Included in the item Other are trademarks of SEK 768m (851) and customer relationships etc. amounting to SEK 886m (1,084). Amortization of intangible assets are included within Cost of goods sold with SEK 560m (435), Administrative expenses with SEK 250m (247) and Selling expenses with SEK 79m (71) in the income statement. Electrolux did not capitalize any borrowing costs during the period.