H
13 Intangible assets (continued)
Our strategy
Our performance
Governan
Financials
Investors
Ahold Annual Report 2013 109
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 29,
December 30,
million
2013
2012
Reportable segment
Cash-generating unit
Ahold USA Stop Shop New England 12 12
Stop Shop New York Metro 22 23
Giant Carlisle 209 217
Giant Landover 7 7
Peapod 19 20
The Netherlands Albert Heijn 335 255
bol.com 201 201
Etos 7 7
Gall Gall 1 1
Czech Republic Czech Republic 24 26
Ahold group 837 769
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 years and are based
on the financial plans approved by the Company's management. Due to the expected continuation of high growth in the relevant on-line retail markets, the periods covered by the projections
for bol.com and Peapod are ten years to better reflect the growth expectations in sales, profitability and cash generation after the first five year projection period. The key assumptions for the
value-in-use calculations are those regarding discount rate, sales growth and operating margin. The post-tax rates used to discount the projected cash flows reflect specific risks relating to
relevant CGUs and are 5.7% for Ahold USA, 5.9% for the Netherlands, 10.3% for bol.com and 6.8% for the Czech Republic. The sales 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. The average annual compound sales growth
rates applied in the projected period ranged between 2.8% and 15.5%. The average operating margins applied in the projected period ranged between 1.7% and 6.6%. 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.
The sensitivity analyses 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 for
Ahold USA, the Netherlands (excluding bol.com) and the Czech Republic were higher by 2%. Should the sales growth rate of bol.com be reduced by 170 basis points, the operating margin be
reduced by 50 basis points or the discount rate be raised by 145 basis points in the projected period, the carrying value of this CGU would equal the recoverable amount.
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 the name "bol.com." Ahold expects that 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 €25 million (2012: €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 2013 is the prepaid purchase consideration for the transfer of C1000 stores
of €127 million (2012: €204 million). The amount will be reallocated to the appropriate intangible assets (mainly goodwill) as agreements are reached with the franchisees.
