19. Goodwill

Goodwill amounts to €3,301 million (30/9/2014: €3,671 million).

The decline is primarily the result of impairment losses of €457 million, with impairment losses on goodwill of Real Germany accounting for €446 million of this total.

Goodwill totalling €71 million of the cash-generating units Galeria Inno Belgium and Galeria Kaufhof department stores Germany was disposed of in the context of the sale of the department store business.

The sale of the wholesale business in Greece resulted in a goodwill disposal of €25 million.

The acquisition of the Classic Fine Foods group by METRO Cash & Carry resulted in goodwill of €143 million.

The acquisition of a majority share in the iBOOD Group resulted in goodwill of €20 million.

In 2009, the non-controlling shareholders of METRO Cash & Carry Romania were granted stock tender rights by METRO GROUP. The subsequent measurement of these put options recognised as financial liabilities resulted in a goodwill increase of €21 million (30/9/2014: decline of €7 million).

At the closing date, the breakdown of goodwill among the major cash-generating units was as shown below:

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30/9/2014

30/9/2015

 

 

 

 

 

 

WACC

WACC

 

€ million

%

€ million

%

Real Germany

1,083

5.7

638

5.4

METRO Cash & Carry France

398

5.7

398

5.4

Media-Saturn Germany / Redcoon group

300

6.7

300

6.3

METRO Cash & Carry Netherlands

264

5.9

264

5.6

METRO Cash & Carry Poland

257

6.5

257

6.2

METRO Cash & Carry Germany

223

5.7

223

5.4

METRO Cash & Carry Hungary

174

8.0

174

7.5

METRO Cash & Carry Italy

171

6.6

171

6.4

METRO Cash & Carry Belgium

145

5.8

145

5.5

Classic Fine Foods group

0

143

METRO Cash & Carry Spain/Portugal

142

6.6

142

6.6

METRO Cash & Carry Romania

54

7.3

75

6.8

Media-Saturn Italy

72

7.7

72

7.5

Galeria Inno Belgium

57

6.2

0

Other companies (each < €50 million or corporate assets)

331

 

299

 

 

3,671

 

3,301

 

In accordance with IFRS 3 in conjunction with IAS 36, goodwill is tested for impairment once a year. This is carried out at the level of a group of cash-generating units. In the case of goodwill, this group is the organisational unit sales line per country. Exceptions to this rule concern the organisational units METRO Cash & Carry Spain and METRO Cash & Carry Portugal, Media-Saturn Germany and the Redcoon group as well as Media-Saturn Netherlands and the iBOOD Group, which form the groups of cash-generating units METRO Cash & Carry Spain/Portugal, Media-Saturn Germany and the Redcoon group as well as Media-Saturn Netherlands and the iBOOD Group due to their close organisational ties. In the impairment test, the cumulative carrying amount of the group of cash-generating units is compared with the recoverable amount. The recoverable amount is defined as the fair value less costs to sell, which is calculated from discounted future cash flows and the level 3 input parameters of the fair value hierarchy.

For an explanation of the fair value hierarchy, see no. 41 – carrying amounts and fair values according to measurement categories.

Expected future cash flows are based on a qualified planning process under consideration of intra-group experience as well as macroeconomic data collected by third-party sources. In principle, the detailed planning period comprises three years. In exceptional cases, it may amount to five years in the case of longer-term detailed planning. As in the previous year, the growth rates considered at the end of the detailed planning period are generally 1.0 per cent, with the exception of the group of the cash-generating unit Real Germany, for which, as in the previous year, a growth rate of 0.5 per cent is assumed. The capitalisation rate as the weighted average cost of capital (WACC) is determined using the capital asset pricing model. In the process, an individual peer group is assumed for all groups of cash-generating units operating in the same business segment. In addition, the capitalisation rates are determined on the basis of an assumed basic interest rate of 1.25 per cent (30/9/2014: 2.5 per cent) and a market risk premium of 6.75 per cent (30/9/2014: 6.0 per cent) in Germany as well as a beta factor of 0.94 to 1.09 (30/9/2014: 0.85 to 1.07). Country-specific risk premiums based on the respective country rating are applied to the equity cost of capital and to the debt cost of capital. The capitalisation rates after taxes determined individually for each group of cash-generating units range from 5.4 to 7.8 per cent (30/9/2014: 5.7 to 8.9 per cent).

The mandatory annual impairment test as of 30 September 2015 resulted in the following assumptions regarding the development of sales, EBIT and the EBIT margin targeted for valuation purposes during the detailed planning period, with the EBIT margin reflecting the ratio of EBIT to net sales:

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Sales

EBIT

EBIT margin

Detailed planning period (years)

Real Germany

Slight growth

Strong growth

Strong growth

4

METRO Cash & Carry France

Slight growth

Slight growth

Unchanged

3

Media-Saturn Germany / Redcoon group

Solid growth

Solid growth

Unchanged

3

METRO Cash & Carry Netherlands

Slight growth

Strong growth

Strong growth

5

METRO Cash & Carry Poland

Slight growth

Substantial growth

Slight growth

5

METRO Cash & Carry Germany

Slight growth

Strong growth

Strong growth

5

METRO Cash & Carry Hungary

Slight growth

Substantial growth

Slight growth

5

METRO Cash & Carry Italy

Solid growth

Strong growth

Strong growth

3

The mandatory annual impairment test as of 30 September 2015 confirmed the recoverability of all capitalised goodwill with the exception of the goodwill of METRO Cash & Carry Japan, which was fully impaired at €2 million in light of business developments. Due to the respective business developments, a goodwill impairment of €446 million and a full goodwill impairment of €10 million were already effected for Real Germany and METRO Cash & Carry Pakistan, respectively, as of 31 March 2015.

In addition to the impairment test, three sensitivity analyses were conducted for each group of cash-generating units. The first sensitivity analysis was based on the assumption of a 1 percentage point lower growth rate. In the second sensitivity analysis, the interest rate for each group of cash-generating units was raised by 10.0 per cent. In the third sensitivity analysis, a lump sum discount of 10.0 per cent was applied to assumed perpetual EBIT. With the exception of Real Germany, METRO Cash & Carry Netherlands, METRO Cash & Carry Poland, METRO Cash & Carry Germany, METRO Cash & Carry Hungary and METRO Cash & Carry Belgium, these changes to the underlying assumptions would not result in impairment at any of the groups of cash-generating units.

In the goodwill impairment test for Real Germany, the fair value less costs to sell exceeded the carrying amount by €11 million. The respective excess amount was €8 million at METRO Cash & Carry Netherlands, €17 million at METRO Cash & Carry Poland, €33 million at METRO Cash & Carry Germany, €14 million at METRO Cash & Carry Hungary and €7 million at METRO Cash & Carry Belgium. At Real Germany, a perpetual EBIT of €124 million was assumed.

Assuming a 0.1 percentage point lower growth rate or a capitalisation rate of 5.61 per cent rather than 5.55 per cent or an assumed perpetual EBIT of €41 million rather than €42 million, the fair value less costs to sell of METRO Cash & Carry Netherlands would correspond to the carrying amount. For METRO Cash & Carry Poland, the fair value less costs to sell would correspond to the carrying amount assuming a 0.3 percentage point lower growth rate or a capitalisation rate of 6.3 per cent rather than 6.2 per cent or an assumed perpetual EBIT of €36 million rather than €38 million. Assuming a 0.4 percentage point lower growth rate or a capitalisation rate of 5.5 per cent rather than 5.4 per cent or an assumed perpetual EBIT of €94 million rather than €96 million, the fair value less costs to sell of METRO Cash & Carry Germany would correspond to the carrying amount. For METRO Cash & Carry Hungary, fair value less costs to sell would correspond to the carrying amount assuming a 0.6 percentage point lower growth rate or a capitalisation rate of 7.9 per cent rather than 7.5 per cent or an assumed perpetual EBIT of €22 million rather than €24 million. Assuming a 0.2 percentage point lower growth rate or a capitalisation rate of 5.6 per cent rather than 5.5 per cent or an assumed perpetual EBIT of €23.8 million rather than €24.4 million, the fair value less costs to sell of METRO Cash & Carry Belgium would correspond to the carrying amount.

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€ million

Goodwill

Acquisition or production costs

 

As of 1/10/2013

3,864

Currency translation

1

Additions to consolidation group

0

Additions

2

Disposals

−7

Reclassifications under IFRS 5

0

Transfers

0

As of 30/9 / 1/10/2014

3,860

Currency translation

0

Additions to consolidation group

0

Additions

184

Disposals

0

Reclassifications under IFRS 5

−116

Transfers

0

As of 30/9/2015

3,928

Depreciation/amortisation/impairment losses

 

As of 1/10/2013

101

Currency translation

0

Additions, scheduled

0

Additions, non-scheduled

88

Disposals

0

Reclassifications under IFRS 5

0

Reversals of impairment losses

0

Transfers

0

As of 30/9 / 1/10/2014

189

Currency translation

0

Additions, scheduled

0

Additions, non-scheduled

457

Disposals

0

Reclassifications under IFRS 5

−20

Reversals of impairment losses

0

Transfers

0

As of 30/9/2015

626

Carrying amount at 1/10/2013

3,763

Carrying amount at 30/9/2014

3,671

Carrying amount at 30/9/2015

3,301