5 Goodwill and other intangible fixed assets

Movements in the goodwill and other intangible fixed assets are shown in the table.

Goodwill

Cash generating unit

In its structure, Q-Park has divided the various countries in which it is active into regions. The regions are managed by the responsible regional management team consisting of a general regional director and a financial regional director. The country directors are managed by, report to and are appraised by the regional management teams. Consequentially, Q-Park identifies its cash generating units at regional level.

The regional structure is defined as follows:

• Region 'Mid' - Netherlands and Germany;
• Region 'West' - United Kingdom and Ireland;
• Region 'South' - France and Belgium;
• Region 'North' - Denmark, Sweden, Norway and Finland.

Impairment calculations

Goodwill impairment calculations are conducted annually in accordance with IAS 36. Per cash generating unit (region), the book value is checked against the realisable value. This realisable value is defined as the greater of the net realisable value according to the ‘value in use’ (VIU) methodology and net realisable value according to the ‘fair value less costs of disposal’ (FVLCD) methodology. The detailed FVLCD calculation is subsequently assessed in the market by an external expert.

In accordance with IFRS 13, the FVLCD calculation used classifies this as a 'level 3' valuation method.

In the impairment calculations the future operational cash flows and investment cash flows used in the business plan calculations are discounted for a period of five years. The calculations can be divided into three parts:

• the cash flows in the first 4 years are based on the most recent business plans;
• in year 5, the cash flows for years 1 to 4 are normalised and indexed;
• the residual value is calculated by dividing the cash flow in year 5 by the weighted average cost of capital (WACC) minus the growth included in the calculation (WACC – g). The growth in the residual value is based on inflation expectations.

The total of these three components is discounted against the weighted average cost of capital (WACC) of each cash generating unit.

Book value and goodwill impairment results

The goodwill impairment test conducted in 2015 confirms the book value of the cash generating units and did not result in further impairment of the goodwill at the close of 2015 (2014 impairment: EUR -133.1 million). The goodwill impairment recognised in 2014 was mainly due to cash flow projections in the business plans. The book value of the goodwill at the end of the financial year and the change in the course of the financial year are shown in the table.

The goodwill arising from the acquisition of business combinations concerning inclusion of the deferred tax liabilities from fair value correction of the identifiable assets is not part of the goodwill included in the impairment test. At the end of the financial year this goodwill amounted to EUR 24.7 million (2014: EUR 27.8 million). The amount of EUR 24.7 million is fully attributable to 'South' region.

Assumptions and sensitivity analysis

The primary assumptions as applied in the goodwill impairment calculation are shown in the table.

The table shows a sensitivity analysis for two different scenarios based on the FVLCD model, and provides insight into the impact of changes in the WACC and growth assumptions on the impairment result in 2015.

An increase in the WACC by 0.25% would have an impact on the impairment result of EUR -5.7 million. A reduction in growth of the residual value from 2.0% to 1.5% would have an impact on the impairment results amounting to EUR -12.7 million. Because of the fact that the goodwill in the 'South' region mostly consists of that explained in the previous paragraph, namely goodwill that is not included in the impairment test, adjustments to the WACC or growth assumptions have an influence of no more than EUR -3.1 million on the impairment results for 2015 for this region.

Because of the limited difference between the estimated realisable value and the book value of the cash generating units, the above-mentioned adjustments result in an impairment. The break-even point lies in an adjustment of the WACC and growth of the residual value as shown in the following table:

When determining the impact as shown in the table above, we have not incorporated the possible effect that the adjustments might have on the value of the investment properties.

Other intangible fixed assets

The investments in other intangible fixed assets are mainly related to the investments in software associated with the development and implementation of a new system for parking season tickets. The impairments in both the 2015 and 2014 financial years are related to the rationalisation of Q-Park's ICT programme, which resulted in write-downs on a number of ICT projects.