Annual Report 2010/11 - Sonova

Key assumptions used for value-in-use calculations:
1,000 cHf
carrying amount
of goodwill
currency Basis for
recoverable
amount
consolidated financial statements 123
discount
rate
Projection
period
long-term
growth rate 2)
advanced Bionics 297,136 Multiple Value in use 9% 10 years 2.00%
Insound Medical 134,478 Usd Value in use 8% 5 years 1.00%
tRe s.a. 67,148 eUR Value in use 7% 5 years 1.00%
Unitron Group 57,483 Multiple Value in use 9% 5 years 1.00%
development finance 1) 54,694 Usd Value in use 9% 5 years 1.00%
national Hearing services 47,067 cad Value in use 9% 5 years 1.00%
Hansaton 27,457 eUR Value in use 8% 5 years 1.00%
Hearing Retail Group 17,340 aUd Value in use 9% 5 years 1.00%
lapperre 12,959 eUR Value in use 9% 5 years 1.00%
Phonak do Brasil 11,216 BRl Value in use 12% 5 years 1.00%
Phonak Ibérica 6,634 eUR Value in use 9% 5 years 1.00%
1) due to the consolidation of certain Group activities in the United states the previously separately disclosed cGU “metro Hearing” has been consolidated with
other individually smaller cash-generating units to a new cGU “development finance”.
2) long-term growth rate excluding inflation.
the discount rates presented above are pre-tax rates.
Based on the impairment tests performed, there was no need for the recognition of any impairment of goodwill for the
financial year 2010/11. Regarding the sensitivity of changes in the assumptions, the Group believes that a possible increase
in the discount rate of 1% would not result in an impairment of goodwill in any of the cash-generating units, except for
advanced Bionics, whereas an increase in the discount rate of 1% would lead to an impairment of cHf 120 million. for
advanced Bionics, a compound average sales growth rate of 14% has been implied for the projection period of ten years
which reflects management’s best estimate and takes into consideration the reduced sales level due to the temporary
recall. the ten year projection period reflects the long term development cycle of the implant business.
impairment charge for the financial year 2009/10
as outlined in note 3.7, “Restatement of prior year’s figures,” the acquisition accounting for the acquisition of advanced
Bionics was finalized taking into consideration the effects of the temporary recall of the HiRes 90k cochlear implant. this
product recall had an impact on the business plan of advanced Bionics, resulting in a downward revision of projected cash
flows compared to the last impairment test performed. an impairment of goodwill amounting to cHf 156.6 million has
been recognized for the financial period 2009/10 and is included in the income statement in the line “impairment.” the
goodwill is included in the reportable segment “Hearing implants,” disclosed in note 5.
impairment on capitalized intangibles of Phonak acoustic implants
in the financial year 2010/11, advanced Bionics and Phonak acoustic implants have been consolidated into a single division,
with the objective to leverage combined technology and business processes. a preliminary assessment of the potential
opportunities between the two businesses and their respective product roadmaps indicates that a number of past development
projects no longer fit into the combined development plan. as a result, a write-off of cHf 35.5 million of previously
capitalized development costs was recorded and is included in the income statement in the line “impairment”. the capitalized
intangibles are included in the reportable segment “Hearing implants,” disclosed in note 5.