The total carrying value was distributed and changed as follows.
|
|
December 31, | |||
|---|---|---|---|---|
|
|
2008 | 2007 | 2008 | 2007 |
| SEK in millions | Goodwill | Other intangible assets | ||
| Accumulated cost | 84,847 | 71,515 | 33,553 | 26,350 |
| Accumulated amortization | – | – | -16,157 | -12,858 |
| Accumulated impairment losses | -416 | -343 | -861 | -756 |
| Advances | – | – | 2 | 1 |
| Carrying value | 84,431 | 71,172 | 16,537 | 12,737 |
| of which work in progress | – | – | 1,380 | 716 |
| Carrying value, opening balance | 71,172 | 62,638 | 12,737 | 11,534 |
| Investments | 6,882 | 4,653 | 4,195 | 3,332 |
| of which capitalized interest | – | – | 29 | 10 |
| Sales and disposals | – | – | -22 | -13 |
| Operations acquired | – | – | 112 | 248 |
| Operations divested | – | -1 | 0 | -1 |
| Grants received | – | – | -3 | – |
| Reclassifications | -122 | 109 | 255 | -7 |
| Amortization for the year | – | – | -2,450 | -2,615 |
| Impairment losses/reversed losses for the year | – | -10 | -95 | -212 |
| Advances | – | – | 1 | -2 |
| Exchange rate differences | 6,499 | 3,783 | 1,807 | 473 |
| Carrying value, closing balance | 84,431 | 71,172 | 16,537 | 12,737 |
Apart from goodwill, there are currently no intangible assets with indefinite useful lives. In the income statement, amortization of and impairment losses on other intangible assets is included in all expense line items by function as well as in line item Other operating expenses. For additional information on significant transactions in 2008, see Note 34 “Business Combinations, etc.”
The total carrying value of goodwill was distributed by reportable segment as follows.
|
|
December 31, | |
|---|---|---|
| SEK in millions | 2008 | 2007 |
| Business area Mobility Services | 58,256 | 54,883 |
| of which Finland | 24,584 | 21,297 |
| of which Norway | 22,591 | 23,973 |
| of which Denmark | 5,427 | 4,723 |
| Business area Broadband Services | 13,548 | 12,030 |
| of which Finland | 9,814 | 8,502 |
| Business area Eurasia | 12,028 | 3,777 |
| of which Azerbaijan | 4,845 | 18 |
| of which Uzbekistan and Tajikistan | 2,818 | 3,221 |
| of which Nepal and Cambodia | 3,190 | – |
| Other operations | 599 | 482 |
| Total goodwill | 84,431 | 71,172 |
The total carrying value of other intangible assets was distributed by asset type as follows.
|
|
December 31, | |
|---|---|---|
| SEK in millions | 2008 | 2007 |
| Trade names | 365 | 398 |
| Licenses | 5,091 | 3,903 |
| Customer relationships, interconnect and roaming agreements | 6,231 | 4,694 |
| Capitalized development expenses | 2,052 | 1,584 |
| Patents, etc. | 1,378 | 1,324 |
| Leaseholds, etc. | 38 | 117 |
| Work in progress, advances | 1,382 | 717 |
| Total other intangible assets | 16,537 | 12,737 |
Capitalized development expenses mainly refer to IT systems, supporting the selling and marketing, and administrative functions.
Impairment testing
Goodwill is for impairment testing purposes allocated to cash-generating units in accordance with TeliaSonera's business organization. In most cases, each geographical market within the respective reportable segment constitutes a cash-generating unit. Carrying values of all cash-generating units are annually tested for impairment. The recoverable amounts (that is, higher of value in use and fair value less cost to sell) are normally determined on the basis of value in use, applying discounted cash flow calculations. From time to time, TeliaSonera may also obtain independent appraisals of fair values to determine recoverable amounts.
In the value in use calculations, management used assumptions that it believes are reasonable based on the best information available as of the date of the financial statements. The key assumptions were sales growth, EBITDA margin development, the weighted average cost of capital (WACC), and the terminal growth rate of free cash flow. The calculations were based on 5-year forecasts approved by management, which management believes reflect past experience, forecasts in industry reports, and other externally available information. Due to the start-up nature of the investments, the forecast period used for cash-generating units Mobility Services – Spain and Eurasia – Uzbekistan was 10 years.
Business area Eurasia's operations in Nepal and Cambodia, each constituting a cash-generating unit, were acquired in October 2008. The investment decision and the purchase price allocation were based on the discounted cash flow of management's projections. There have been no events after the acquisition that would cause management to significantly change the previous cash flow projections. Consequently, the original projections also form the basis for the 2008 impairment test.
The post-tax WACC rates and the terminal growth rates used to extrapolate cash flows beyond the 5-year forecasts (in Spain and Uzbekistan 10-year forecasts) varied by reportable segment and geographic area as follows.
| Percent | Sweden | Finland | Norway | Denmark | Baltic countries | Spain | Eurasian countries |
|---|---|---|---|---|---|---|---|
| Business area Mobility Services |
|
|
|
|
|
|
|
| WACC rates | 7.0 | 7.3 | 7.4 | 7.9 | 10.5–11.5 | 11.1 | – |
| Terminal growth rates | 1.0 | 2.0 | 2.0 | 2.0 | 2.0 | 2.0 | – |
| Business area Broadband Services |
|
|
|
|
|
|
|
| WACC rates | 7.0 | 7.3 | 7.4 | 7.9 | 7.4–8.7 | – | – |
| Terminal growth rates | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | – | – |
| Business area Eurasia |
|
|
|
|
|
|
|
| WACC rates | – | – | – | – | – | – | 11.5–18.0 |
| Terminal growth rates | – | – | – | – | – | – | 1.0–2.5 |
| Other operations |
|
|
|
|
|
|
|
| WACC rates | 7.4–10.0 | – | – | – | – | – | – |
| Terminal growth rates | 1.0 | – | – | – | – | – | – |
In all cases management believes the terminal growth rates to not exceed the average growth rates for markets in which TeliaSonera operates.
As of December 31, 2008, the recoverable values based on value in use of the cash-generating units were found not to fall short of their carrying values in any test and therefore the related goodwill was not impaired. For cash-generating unit Broadband Services – Norway, with a goodwill carrying value of SEK 1,545 million, the estimated recoverable value corresponded to the carrying value. In the impairment test for Broadband Services – Norway, the sales growth assumption was between 5–9 percent during the next 5 years. The EBITDA margin during the same period was assumed to be between 20–22 percent, and the terminal growth rate of free cash flow after the 5-year period was assumed to be 1.0 percent. A post-tax WACC rate of 7.4 percent was used in the test.
The following table sets out to what extent each key assumption approximately must change, all else being equal, in order for the recoverable value to change by 10 percent, or by SEK 0.2 billion.
|
|
|
|---|---|
| Sales growth in the 5-year period | +1.5 percentage points |
| EBITDA margin in the 5-year period and beyond | +1.4 percentage points |
| Terminal growth rate of free cash flow | +0.7 percentage points |
| Post-tax WACC rate | -0.6 percentage points |