Note 11: Intangible assets

Intangible assets

In € millions

Goodwill

Brands

Customer lists

Other
intangibles

Total

 

 

 

 

 

 

Balance at January 1, 2020

 

 

 

 

 

Cost of acquisition

1,121

2,208

940

175

4,444

Cost of internally developed intangibles

191

191

Accumulated amortization/impairment

(28)

(185)

(545)

(252)

(1,010)

Carrying value at January 1, 2020

1,093

2,023

395

114

3,625

 

 

 

 

 

 

Movements in 2020

 

 

 

 

 

Acquisitions through business combinations

48

8

23

11

90

Investments – including internally developed intangibles

34

34

Amortization

(11)

(33)

(20)

(64)

Changes in exchange rates

(45)

(76)

(10)

(131)

Total movements

3

(79)

(20)

25

(71)

 

 

 

 

 

 

Balance at December 31, 2020

 

 

 

 

 

Cost of acquisition

1,123

2,134

921

178

4,356

Cost of internally developed intangibles

212

212

Accumulated amortization/impairment

(27)

(190)

(546)

(251)

(1,014)

Carrying value at December 31, 2020

1,096

1,944

375

139

3,554

 

 

 

 

 

 

Movements in 2021

 

 

 

 

 

Acquisitions through business combinations

18

8

10

36

Investments – including internally developed intangibles

35

35

Amortization

(12)

(34)

(24)

(70)

Changes in exchange rates

41

90

5

(1)

135

Total movements

59

86

(19)

10

136

 

 

 

 

 

 

Balance at December 31, 2021

 

 

 

 

 

Cost of acquisition

1,182

2,239

972

171

4,564

Cost of internally developed intangibles

241

241

Accumulated amortization/impairment

(27)

(209)

(616)

(263)

(1,115)

Carrying value at December 31, 2021

1,155

2,030

356

149

3,690

Brands as included in the table comprise of brands with indefinite useful lives and brands with finite useful lives. Brands with indefinite useful lives are almost fully related to Dulux, which is the major brand, due to its global presence, high recognition and strategic nature. Other intangibles include licenses, know-how, intellectual property rights, software and development cost. Both at year-end 2021 and 2020, there were no material purchase commitments for individual intangible assets. No intangible assets were registered as security for bank loans.

Annual impairment testing

Goodwill and other intangibles per business unit

 

Goodwill

Brands with indefinite useful lives

Other intangibles with finite useful lives

Total intangibles

In € millions, at December 31

2020

2021

2020

2021

2020

2021

2020

2021

Decorative Paints Europe, Middle East and Africa

97

114

837

837

148

146

1,082

1,097

Decorative Paints South America

83

87

1

84

87

Decorative Paints Asia

10

9

847

928

38

31

895

968

Powder Coatings

149

155

48

32

197

187

Marine and Protective Coatings

163

174

78

80

241

254

Automotive and Specialty Coatings

281

288

180

175

461

463

Industrial Coatings

396

415

126

120

522

535

Corporate and other

72

99

72

99

Total

1,096

1,155

1,767

1,852

691

683

3,554

3,690

Goodwill and other intangibles with indefinite useful lives are tested for impairment per business unit (one level below segment level) annually or whenever an impairment trigger exists, applying the value-in-use method. The impairment test is in principle based on cash flow projections of the five-year plan. Elements considered to determine if a different approach would be more appropriate are, among others, high growth/emerging economies, geo expansion opportunities, introduction of new product ranges and opportunities from market consolidation. In 2021, the above exception was applied for Decorative Paints Asia and Decorative Paints , for which the revenue growth and -margin development projections were extrapolated beyond the five-year explicit forecast period for another five years, applying reduced average growth rates.

The situation around COVID-19 is closely monitored; the impact on the estimated future cash flows is reflected in the models which are used to assess the valuation of the carrying value of AkzoNobel’s asset base.

The key assumptions used in the projections for annual impairment testing are:

  • Revenue growth per year: based on actual experience, analysis of markets and GDP growth and expected market share developments
  • Adjusted -margin development per year: based on actual experience and management’s long-term projections
  • Weighted average cost of capital per year: the pre-tax discount rate determined per business unit, reflecting current market assessments of the time value of money and the risks specifically associated with the business units
Key assumptions

In % per year

Average revenue growth
2022-2026

Pre-tax weighted average cost of capital 2022-2026

Decorative Paints

1.1-5.9%

8.4-12.5%

Performance Coatings

2.6-4.7%

7.8-8.1%

For all business units, a terminal value was calculated based on the long-term inflation expectations of 1.0%. The estimated pre-tax cash flows are discounted to their present value using a pre-tax weighted average cost of capital. The discount rates are determined for each business unit and range from 7.8% to 12.5% (2020: 8.9% to 14.5%), with a weighted average of 8.4% (2020: 9.6%).

Sensitivity tests were performed for growth assumptions, adjusted EBITDA margin development assumptions and for the weighted average cost of capital. These sensitivity tests show that reasonably possible changes in these key assumptions would not cause carrying amounts to exceed recoverable amounts for any of the business units.

In 2021 and 2020, no impairment charges were recognized in relation to the annual impairment test.

Specific asset impairments

In 2021 and 2020, no impairment charges were recorded in relation to specific assets.

South America

Excludes Mexico.

Adjusted EBITDA

Adjusted EBITDA is operating income excluding depreciation, amortization and identified items.

EBITDA

Operating income excluding depreciation and amortization.