Notes to the consolidated financial statements
99
13 Intangible assets (continued)
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Ahold
Annual Report 2015
Goodwill recognized on acquisitions in 2015 relates mainly to the acquisition of A&P stores in the United States (allocated to Stop Shop New York Metro) and C1000 stores in the Netherlands (allocated to Albert Heijn)
(see Note 4 for more details). Goodwill recognized on acquisitions in 2014 relates mainly to the acquisition of SPAR in the Czech Republic and the C1000 stores in the Netherlands.
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:
million
January 3,
2016
December 28,
2014
Reportable segment
Cash-generating unit
Ahold USA
Stop Shop New England
16
15
Stop Shop New York Metro
124
25
Giant Carlisle
264
235
Giant Landover
9
8
Peapod
24
21
The Netherlands
Albert Heijn
456
393
bol.com
201
201
Etos
8
8
Gall Gall
1
1
Czech Republic
Czech Republic
133
124
Ahold group
1,236
1,031
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 Row 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 Row for bol.com and Peapod over 10-year periods 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 relate to discount rate, sales growth and operating margin. The post-tax rates used to discount the projected cash
Rows refect specific risks relating to relevant CGUs and are 6.2% for Ahold USA, 5.6% for The Netherlands, 10.0% for bol.com and 6.1% for the Czech Republic. The pre-tax discount rates are 10.3% for Ahold USA, 9.0%
for Peapod, 74% for The Netherlands, 12.1% for bol.com and 74% for the Czech Republic. The value in use for the CGUs would be the same as that which would be derived from discounting pre-tax cash Rows at these
pre-tax discount rates. 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 periods ranged between 13.6% and 14.2% for the CGUs of our online business and between 0.7% and 4.0% for the other CGUs.
The average operating margins applied in the projected periods ranged between 0.8% and 2.1% for the CGUs of our online business and between 2.6% and 5.9% for the other CGUs. Growth rates used to extrapolate cash
Rows 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 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 inRows. 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 €32 million (2014: €28 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 was the prepaid purchase consideration for the
transfer of C1000 stores of €74 million. In 2015 and 2014, Ahold recognized €9 million and €8 million, respectively, of impairment losses for the prepaid consideration. In 2015, the remaining amount was reallocated to the
appropriate intangible assets (mainly goodwill) as agreements were reached with the franchisees.
Intangible assets under development relate mainly to software development. Amortization of software in 2014 included €10 million of accelerated amortization that resulted from a re-evaluation of the useful lives.
