english - About Heraeus

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In business combinations, the acquired assets and liabilities are recognized at fair value
at the time of acquisition. The determination of the fair values at the time of acquisition,
as well as the useful lives of the acquired intangible assets and property, plant, and equipment
is based on assumptions. The measurement is largely based on projected cash flows.
The actual cash flows may differ significantly from the cash flows used to determine
the fair values. The purchase price allocation of material acquisitions is based on external
independent appraisals. Measurements for business combinations are based on the information
available on the acquisition date. In addition to assumptions about the development
of future cash flows, valuations are significantly influenced by the discount interest rate.
Goodwill has to be allocated to cash generating units and tested for impairment once a year.
The carrying amount of cash generating unit is compared with its recoverable amount and
an impairment loss is recognized where the recoverable amount is lower than the carrying
amount. Impairment testing relies upon long-term earnings predictions based on overall
economic trends. The weighted average cost of capital (WACC) plays an important role. The
WACC is made up of the risk-free interest rate, the market risk premium, the beta factors,
assumptions as to the spread for credit risk, as well as the debt ratio. Additional important
assumptions are the predictions for the detailed planning period and the subsequently
applied growth rates.
Intangible assets and property, plant, and equipment: The estimated useful life and depreciation
method chosen are based on historical values, plans, and estimates.
Impairment tests on assets are required whenever certain triggering events indicate that
an impairment may be necessary. External triggering events include, for example, changes
in customer industries, technologies used, and economic downturns. Internal triggering
events for an impairment include lower product profitability, planned restructuring measures,
or physical damage to assets. Impairment tests are based on a comparison of the carrying
amount of an asset and its recoverable amount. The recoverable amount is the higher of the
fair value less costs and the value in use. The determination of value in use requires the
estimation and discounting of cash flows. The estimation of cash flows and the assumptions
used consider all information available on the respective balance sheet date on the future
development of the operating business. Actual future developments may vary. An impairment