13 Intangible assets (continued)
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Ahold Annual Report 2012 102
Ahold at a glance
Our strategy
Our performance
Governance
Financials
Investors
Notes to the consolidated
financial statements
Goodwill acquired in business combinations is allocated, at acquisition, to the Cash-Generating Units (CGUs) or groups of CGUs expected to benefit from that business combination.
The carrying amounts of goodwill allocated to CGUs within Ahold's reportable segments are as follows:
December 30,
January 1,
million
2012
2012
Reportable segment
Cash-generating unit
Ahold USA
Stop Shop New England
12
12
Stop Shop New York Metro
23
23
Giant Carlisle
217
164
Giant Landover
7
Peapod
20
20
The Netherlands
Albert Heijn1
255
152
bol.com1
201
Etos
7
6
Gall Gall
1
1
Other Europe
Czech Republic
26
26
Ahold group
769
404
1 Of the €248 million of goodwill that resulted from the acquisition of bol.com, €47 million has been allocated to Albert Heijn.
CGUs to which goodwill has been allocated are tested for impairment annually or more frequently if there are indications that a particular CGU might be impaired. The recoverable amount
of each CGU was determined based on value-in-use calculations. Value-in-use was determined using discounted cash flow projections that generally cover a period of five or 10 years
and are based on the financial plans approved by the Company's management. The key assumptions for the value-in-use calculations are those regarding discount rates, growth rates
and operating margins. The post-tax rates used to discount the projected cash flows reflect specific risks relating to relevant CGUs and are 4.7% for Ahold USA, 5.2% for the Netherlands and
8.2% for the Czech Republic. The sensitivity analysis, with respect to changes in the discount rates, indicated that the recoverable amounts of the CGUs would still be in excess of the carrying
amounts with sufficient and reasonable headroom if the discount rates were higher by 2%.The growth rates and operating margins used to estimate future performance are based on past
performance and experience of growth rates and operating margins achievable in Ahold's main markets. Growth rates used to extrapolate cash flows beyond the explicit forecast period are set
such that the return on invested capital never exceeds the weighted average cost of capital of the CGUs.
Lease-related intangible assets consist primarily of favorable operating lease contracts acquired in business acquisitions. Customer relationships consist primarily of pharmacy scripts and
customer lists recognized through the acquisition of bol.com in 2012. Brand names include "bol.com." Ahold expects bol.com will play an important role in its business strategy and believes
there is currently no foreseeable limit to the period over which the brand is expected to generate net cash inflows. Therefore the brand is assessed to have an indefinite useful life. The asset is
tested for impairment in accordance with the policies as stated in Note 3. "Other" mainly includes intangible assets related to location development rights, deed restrictions and similar assets.
Included in "Other" is an intangible asset allocated to Stop Shop New England with an indefinite useful life and a carrying value of €26 million (201 1€26 million). The useful life of this
asset is assessed to be indefinite since it relates to the land portion of an owned location. Also included in 2012 is the prepaid purchase consideration for the transfer of C1000 stores (€204
million). The amount will be reallocated to the appropriate intangible assets (mainly goodwill) as agreements are reached with the franchisees. Intangible assets under development relate
mainly to software development.
The additions to intangible assets under development include capitalized borrowing costs of €5 million (201 1€3 million). The capitalization rate used was the same as for property, plant and
equipment (see Note 7 7). In 2012, €92 million has been recognized as write-downs of intangible assets under development. These were related to Ahold USA (€88 million) and the
Netherlands (€4 million).
