Notes to the consolidated financial statements Annua l Report 2014 93
13 Intangible assets (continued)
Ahold at a glance I Business review I Governance I Financials
Goodwill recognized on acquisitions in 2014 relates mainly to the acquisition of SPAR in the Czech Republic and C1000 stores (see Note 4 for more details). Goodwill recognized on acquisitions in 2013 relates mainly to the
acquisition of C1000 stores.
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 28, December 29,
million 2014 2013
Reportable segment Cash-generating unit
Ahold USA
Stop Shop New England
15
12
Stop Shop New York Metro
25
22
Giant Carlisle
235
209
Giant Landover
8
7
Peapod
21
19
The Netherlands
Albert Heijn
393
335
bol.com
201
201
Etos
8
7
Gall Gall
1
1
Czech Republic
Czech Republic
124
24
Ahold group
1,031
837
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 is determined based
on value-in-use calculations. Value-in-use is 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 online retail markets, we project cash flow for bol.com and Peapod over 10-year periods to better refect 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 relate to discount rate, sales growth and operating margin. The post-tax rates used to discount the projected cash flows
refect specific risks relating to relevant CGUs and are 6.0% for Ahold USA, 5.9% for the Netherlands, 10.6% for bol.com and 6.6% for the Czech Republic. The sales growth rates and operating margins used to estimate
future performance are based on past performance and our 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 13.8% and 14.0% for the CGUs of our online business and ranged between 1.3% and 5.0% for the other CGUs. The average operating margins applied in the projected period ranged between
1.2% and 2.0% for the CGUs of our online business and ranged between 3.0% and 6.1% for the other CGUs. 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 relevant discount rates for the CGUs were higher by
2% or the sales growth rates in the projected period were lower by 2%. Should the operating margin of bol.com be reduced by approximately 95 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 €28 million (2013: €25 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 2014 is the prepaid purchase consideration for the
transfer of C1000 stores of €74 million (2013: €127 million). The amount will be reallocated to the appropriate intangible assets (mainly goodwill) as agreements are reached with the franchisees. In 2014, Ahold recognized
an €8 million impairment loss for the prepaid consideration.
Intangible assets under development relate mainly to software development. Amortization of software in 2014 includes €10 million of accelerated amortization that resulted from a re-evaluation of the useful lives. In 2013, there
was a €8 million write-down of capitalized software development costs.
