FINANCIAL STATEMENTS 2010 - Finnlines

GOODWILL IMPAIRMENT TESTING
For the purpose of impairment testing, goodwill is allocated to cash-generating units. The allocation principle has been unchanged
from 2009 as the business structure and vessel set-up has remained the same. The goodwill related to Finland–Germany traffic is
allocated to HansaLink traffic, which is operated as a common vessel system between Finland, Poland and Germany. Goodwill related
to south Sweden–Germany traffic is allocated to NordöLink traffic.
EUR 1,000 2010 2009
Allocation of goodwill to the cash-generating units
NordöLink 68,972 68,972
HansaLink (Finland–Poland–Germany traffic) 36,671 36,671
Total 105,644 105,644
NordöLink and HansaLink are included in Shipping and Sea Transport Services segment.
The current recoverable amount of cash-generating units is determined based on their value in use. The cash flow forecasts for the
tested units are based on the next year’s budget and the forecasts for the subsequent four years (five year business plans) approved
by management. The projections of cash flow for the five year period are based on experience and assumed future development of
markets, and are in line with the external information.
HansaLink asset structure and traffic pattern has remained unchanged in 2010. During the year 2009, the Finland-Germany traffic
(HansaLink) was strengthened by putting all the five Star-class vessels delivered in 2006-2007 on the route. Simultaneously, the
vessels started to regularly call at Poland en route.
In 2008, the NordöLink traffic was operated with two large Star-class vessels and two smaller ro-pax vessels. In 2009, the two Star-
class vessels were transferred to HansaLink and replaced by one smaller ro-pax vessel better adjusted to the market volumes. In 2010
traffics was continued with the same vessel system.
The main assumptions in the five-year business plans relate to market growth, market share, price level and development of passen-
ger services. The market growth rates used are derived from recent external economic forecasts adjusted to the relevant market. The
company expects the relative growth of passenger business to continue on a stronger level than cargo business growth based on the
potential related to the further developing of passenger concept with the ro-pax vessels.
The cash flows after the forecast period of five years are extrapolated using the growth factors listed below. The growth factors used
do not exceed the actual long-term growth rate in the sector in question.
The weighted average pre-tax cost of capital (WACC) is used as a discount rate. The components used to calculate the WACC are
risk free interest rate, market risk premium, industry beta-coefficient, target capital structure and the cost of debt. The same common
components to calculate the discount rates for all cash generating units are used, adjusted with the relevant tax rates. The usage of the
same common components in discount rates is justified as the risks related to the different businesses are interlinked and relate to the
general economic development in the Baltic Sea area.
Main factors used in calculating value in use in 2010
HansaLink
Cash-generating unit
NordöLink
Discount rate (pre-tax) 6.33% 6.33%
LTP period 2011-2015 2011-2015
Growth rate after LTP period 2.00% 2.00%
The resulting share of terminal value of the calculated discounted cash flow 84.4% 83.3%
26 FINNLINES PLC Financial Statements 2010 (figures in EUR thousand, if not stated otherwise)