Annual report 2019

103

GOODWILL For the purpose of impairment testing, goodwill is allocated to the cash-generating units (CGU) which represent the lowest level within the Group at which the goodwill is monitored for internal management purposes. This does not exceed the level of Group’s operating segments reported in note 4 on Segment reporting.

Goodwill is allocated to the following cash-generating units:

2019

2018

CASH-GENERATING UNIT

OPERATIONAL SEGMENT Dredging & Inland Infra

Inland Infra

46,607 36,875 13,595 97,077

46,607 36,875 13,595 97,077

Salvage Dredging

Towage & Salvage

Dredging & Inland Infra

Total

When conducting impairment tests on goodwill, the recoverable amounts are determined based on value in use calculations. Value in use is determined by discounting the expected future cash flows from the continuing operations of the CGU. Management projects cash flows based on past trends and estimates of future market developments, cost developments and investment plans. These projections also factor in market conditions, order book in hand, expected win rates of contracts and expected vessel utilization. Key assumptions in the calculation of value in use are the growth rate applied in the calculation of the terminal value and the discount rate used. Cash flows for the CGUs beyond five years are extrapolated using an estimated long-term growth rate of 1% (2018: 1%). The applicable growth rate does not exceed the long-term average growth rate which may be expected for the activities. The pre-tax discount rate used in the calculations per CGU are: Inland Infra 8.3% (2018: 8.4%), Salvage 6.5% (2018: 6.7%) and Dredging 7.9% (2018: 8.2%) and is determined by means of an iterative calculation using the projected post-tax cash flows, expected tax rate and a post-tax discount rate for each CGU. The Group has analyzed sensitivity to a reasonable possible change in the discounted expected future cash flows of the carrying amount, including goodwill, of the CGU (‘headroom’). The recoverable amounts for Inland Infra, Salvage and Dredging exceed the carrying amounts of the CGUs with significant headroom. In 2018 the Group incurred a non-cash goodwill impairment charge of EUR 154.9 million with regard to Offshore Energy (to nil). This charge is almost entirely related to current market circumstances that are not expected to materially improve in the foreseeable future, specifically with respect to the lower-end service segments of the offshore energy market. These market circumstances have resulted in a downward adjustment of the projected future cash flows for the Offshore Energy cash-generating unit (CGU). After recognizing the goodwill impairment charge the recoverable amount for Offshore Energy equals EUR 1.2 billion (2018), based on a value in use calculation. OTHER INTANGIBLE ASSETS Other intangible assets, which are identified and recognized at fair value in business combinations, consist of trade names, technology (including software) and favorable contracts.

ANNUAL REPORT 2019 – BOSKALIS A 9 -- BOSKALIS