11. Intangible Assets

Goodwill and Intangible Assets

The carrying amounts of goodwill increased by €522 million compared with the previous year to €766 million (previous year: €244 million).

The year-on-year change was attributable in particular to the goodwill of €473 million (including currency effects) from the acquisition of Chantecaille, which has been allocated in full to the new Chantecaille cash-generating unit. Goodwill in the Consumer Business Segment also includes the goodwill of €168 million (previous year: €159 million) in the North American cash-generating unit and the goodwill of €59 million (previous year: €57 million) attributable to Beiersdorf AG (Switzerland). The change versus the previous year (or in the case of Chantecaille: versus the value at the time of acquisition) was attributable to currency effects.

Indefinite-lived intangible assets mainly include acquired trademarks from the acquisition of the Coppertone business amounting to €188 million (previous year: €188 million). The trademarks of €188 million are established in their markets and will continue to be advertised in the future. They therefore represent indefinite-lived intangible assets.

The purchase price allocation for the Chantecaille acquisition identified trademarks and customer relationships. These were classified in their entirety as finite-lived intangible assets and will be amortized over their useful lives. As of the reporting date, the carrying amount was €70 million.

Impairment tests were performed as of 31 December, 2022 on the goodwill as well as trademarks recognized for all relevant cash-generating units. Forecast cash flows were used to calculate value in use in order to determine the recoverable amount.

The main estimates on which the impairment tests were based included market shares and rates of sales growth, price trends for commodities, gross profit margins, and corresponding discount rates. The detailed planning anticipates moderate sales growth and a typical EBIT margin for the Group. For the Chantecaille cash-generating unit, the detailed planning anticipates that sales growth and the EBIT margin will be typical for the relevant markets. Estimated future cash flows were based on financial planning with a five-year horizon. Cash flows beyond the planning period were extrapolated using an individual growth rate taking into account external macroeconomic and business-specific factors. Beyond the planning horizon, this growth rate (terminal growth rate) was assumed to be 1.0% (previous year: 1.0%) for North America and Switzerland and 2.5% for Chantecaille. The weighted pre-tax discount rate used to discount the estimated cash flows was 6.9% for North America (previous year: 5.6%), 5.0% for Switzerland (previous year: 4.2%), and 8.3% for Chantecaille.

Due to the increased competitive pressure as well as rising procurement prices and the associated poorer expected cash flows in the tesa Twinlock cash-generating unit, the impairment test showed an impairment of goodwill amounting to €8 million. The impairment was recognized in other operating expenses and is attributable to the tesa Business Segment.

The impairment tests for the other cash-generating units did not reveal any need for impairment of goodwill or trademarks in the reporting year. In the case of these cash-generating units, the Group assumes that the recoverable amount will exceed the carrying amount of the goodwill, even in the event of reasonably possible changes in the key assumptions used in impairment testing. This observation also considers the potential impacts of the COVID-19 pandemic. These mainly relate to the sales markets and thus the development of forecast sales.