(h)Intangible assets
(i)Goodwill
Goodwill is generated on the business combinations and is calculated using the criteria described in the section on business combinations.
Goodwill is not amortized, but is tested for impairment annually or more frequently whenever there is an indication that goodwill may be impaired. Goodwill acquired in business combinations is allocated to the cash-generating units (CGUs) or groups of CGUs which are expected to benefit from the synergies of the business combination and the criteria described in note 7 are applied. After initial recognition, goodwill is measured at cost less any accumulated impairment losses.
(ii)Internally generated intangible assets
Any research and development expenditure incurred during the research phase of projects is recognized as an expense when incurred.
Costs related with development activities are capitalized when:
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The Group has technical studies that demonstrate the feasibility of the production process; |
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The Group has undertaken a commitment to complete production of the asset, to make it available for sale or internal use; |
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The asset will generate sufficient future economic benefits; |
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The Group has sufficient technical and financial resources to complete development of the asset and has devised budget control and cost accounting systems that enable monitoring of budgetary costs, modifications and the expenditure actually attributable to the different projects. |
The cost of internally generated assets by the Group is calculated using the same criteria established for determining production costs of inventories. The production cost is capitalized by allocating the costs attributable to the asset to self-constructed non-current assets in the consolidated statement of profit and loss.
Expenditure on activities that contribute to increasing the value of the different businesses in which the Group as a whole operates is expensed when incurred. Replacements or subsequent costs incurred on intangible assets are generally recognized as an expense, except where they increase the future economic benefits expected to be generated by the assets.
(iii)Other intangible assets
Other intangible assets are carried at cost, or at fair value if they arise on business combinations, less accumulated amortization and impairment losses.
Intangible assets with indefinite useful lives are not amortized but tested for impairment at least annually.
(iv)Intangible assets acquired in business combinations
The cost of identifiable intangible assets acquired in the business combination of Hologic includes the fair value of the R&D projects and the Intellectual Property-Patents.
The cost of identifiable intangible assets acquired in the business combination of Novartis includes the fair value of the existing royalty agreements.
The cost of identifiable intangible assets acquired in the business combination of the Progenika Group includes the fair value of the currently marketed products sold and which are classified under “Other intangible assets” and “Development costs”.
The cost of identifiable intangible assets acquired in the Talecris business combination includes the fair value of currently marketed products sold and which are classified under “Other intangible assets”.
(v)Useful life and amortization rates
The Group assesses whether the useful life of each intangible asset acquired is finite or indefinite. An intangible asset is regarded as having an indefinite useful life when there is no foreseeable limit to the period over which the asset will generate net cash inflows.
Intangible assets with finite useful lives are amortized by allocating the depreciable amount of an asset on a systematic basis over its useful life, by applying the following criteria:
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Amortisation method |
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Rates |
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Development expenses |
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Straight line |
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10% |
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Concessions, patents, licences, trademarks and similar |
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Straight line |
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7% - 20% |
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Computer software |
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Straight line |
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33% |
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Currently marketed products |
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Straight line |
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3% - 10% |
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The depreciable amount is the cost or deemed cost of an asset, less its residual value.
The Group does not consider the residual value of its intangible assets to be material. The Group reviews the residual value, useful life and amortization method for intangible assets at each financial year end. Changes to initially established criteria are accounted for as a change in accounting estimates.