Annual Report 2005/06 THE WORLD OF SOUND - Sonova

GoodwillSoftwareIntangiblesrelating toacquisitionsOtherintangiblesTotalintangibleassets1,000 CHFCostBalance April 1Change in accounting principles (IFRS 3)Changes through business combinationsAdditionsDisposalsExchange differencesBalance March 31Accumulated amortizationBalance April 1Change in accounting principles (IFRS 3)Changes through business combinationsAdditionsDisposalsExchange differencesBalance March 31Net book valueBalance April 1Balance March 31247,791(117,189)573131,175117,296(117,296)130,495131,17515,6733,472(1,711)(181)17,2539,1303,520(1,711)(309)10,6306,5436,6231,2241,22433331,1912,36035152,4102,2282642,25813215231.3.2005265,824(117,189)1,2243,507(1,711)407152,062128,654(117,296)333,546(1,711)(305)12,921137,170139,141No internally generated intangible assets have been capitalized during financial years 2005/06 and 2004/05. Goodwill has an indefinitelife. Other intangibles and software have finite lives.In accordance with the requirements of IFRS 3, the Group has eliminated the accumulated amortization of goodwill at March 31, 2004,with a corresponding decrease in cost of goodwill. Negative goodwill of CHF 107,000 has been derecognized with a correspondingadjustment of the opening balance of retained earnings.The Group has performed an impairment test on goodwill in the first half of the financial year 2005/06. For the purpose of impairmenttesting, goodwill is allocated to a cash-generating unit or to a group of cash-generating units, which are expected to benefit fromthe synergies of the corresponding business combination. For the impairment test, the recoverable amount of a cash-generating unit(higher of the cash-generating unit’s fair value less selling costs and its value in use) is compared to the carrying amount of thecorresponding cash-generating unit. Future cash flows are discounted with the Weighted Average Cost of Capital (WACC) includingthe use of the Capital Asset Pricing Model (CAPM). Value in use is normally assumed to be higher than the fair value less sellingcosts, therefore, fair value less selling costs is only investigated when value in use is lower than the carrying amount of the cashgenerating unit.The cash flow projections are based on a five-year period. Cash flows beyond the five-year period are extrapolated using estimatedlong-term growth rates. The growth rates do not exceed the long-term average growth rate for the hearing instruments industry inwhich the cash-generating units operate.70 Consolidated Financial Statements