VINCI - 2005 annual report

The main goodwill items at 31 December 2005, except for those reported
under equity-accounted investments, were:
31/12/2005 31/12/2004
(in € millions) Gross (*) Impairment losses (**) Net Net
VINCI Park (formerly Sogeparc and Finec) 343.3 343.3 343.3
VINCI Airports US (WFS/ACAC) 87.8 (21.4) 66.3 62.4
Teerbau GmbH 38.7 38.7 38.7
Entreprise Jean Lefebvre 39.3 (3.0) 36.3 37.8
VINCI PLC 22.0 22.0 20.8
Emil Lundgren AB 21.0 21.0 21.0
EFS 19.0 19.0 19.0
Netlink BV 10.6 10.6 10.6
Other goodwill items individually
less than €10 million (***) 283.1 (27.1) 256.0 223.4
864.7 (51.6) 813.1 776.9
(*) Gross amount less cumulative amortisation at 1 January 2004 (opening IFRS balance sheet).
(**) Cumulative impairment losses.
(***) On the basis of the net value for individual entities, in each of the two periods.
12. IMPAIRMENT LOSSES ON GOODWILL
AND OTHER NON-FINANCIAL ASSETS
In accordance with IAS 36 Impairment of assets, goodwill and other non
financial assets have been tested for impairment at 31 December 2005.
The value in use of cash-generating units (CGUs) is determined, on the
basis of activity and country, by discounting the forecast operating cash
flows before tax (operating profit + depreciation and amortisation +
non-current provisions – operating investments – change in operating
WCR), at the rates below.
Forecast cash flows are generally determined on the basis of the latest
three-year plans available. For periods beyond the three-year period, cash
flows are extrapolated until the fifth year, using a growth rate generally
12.1 IMPAIRMENT LOSSES ON GOODWILL
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VINCI 2005 ANNUAL REPORT
equal to that of the last year in the plan, depending on management’s
assessment of the outlook for the entity under consideration.
Beyond the fifth year, the terminal value is determined by capitalising cash
flows to infinity.
The impairment tests carried out for the year led to the Group recognising
total impairment losses on non-financial assets for 2005 amounting to
€19.8 million (€13.2 million on goodwill and €6.8 on other non-financial
assets).
The largest goodwill items relate to the following CGUs:
VINCI Park VINCI Airport Other
US goodwill(**)
Net carrying amount of goodwill (in € millions) 343.3 66.3 403.5
Method used
Model variables (*)
Value in use Value in use Value in use
Growth rate on forecasts for years Y + 3 to Y + 5 (***) 1% to 2% 1% to 2%
Growth rate on terminal value — 2.0% 0% to 2%
Pre-tax discount rate 8.98 % 11.25% 8.98% to 11.72%
Impairment loss recognised for the year (in € millions)
(*) Applicable to cash flows.
(**) Of unit amounts of less than €40 million.
13.2
(***) The cash flow forecasts are determined by VINCI Park over the average length of the concession contracts, using a growth rate of 3% for revenue and 2% for operating expenses.
The impairment losses recognised in the period (€13.2 million) relate in
particular to the subsidiaries of VINCI PLC for €3.2 million and VINCI
Energies for €2.9 million. They also include goodwill impairments related
to assets with finite useful life (€2.3 million).
The impairment tests carried out at 31 December 2004 led the Group to
recognise impairment losses of €21.4 million on the airport services
subsidiary, VINCI Airport US. No additional loss was recognised at
31 December 2005 concerning this subsidiary.