|Other intangible assets|
|in € millions||Goodwill||Music and film rights||Other|
|Internally generated intangible assets||Advance payments||Total||Total|
|Balance as of 1/1/2014||7,209||2,038||1,843||873||5||4,759||11,968|
|Currency translation differences||108||105||86||37||–||228||336|
|Acquisitions through business combinations||709||82||169||1||–||252||961|
|Reductions through disposal of investments||(50)||–||(17)||–||–||(17)||(67)|
|Reclassifications in accordance with IFRS 5||(26)||–||(28)||–||–||(28)||(54)|
|Reclassifications and other changes||(1)||87||(10)||(75)||(10)||(8)||(9)|
|Balance as of 12/31/2014||7,915||2,354||1,878||879||2||5,113||13,028|
|Currency translation differences||159||113||82||52||–||247||406|
|Acquisitions through business combinations||124||34||43||9||–||86||210|
|Reductions through disposal of investments||(7)||(15)||(72)||–||–||(87)||(94)|
|Reclassifications in accordance with IFRS 5||–||–||–||–||–||–||–|
|Reclassifications and other changes||2||32||8||(29)||(3)||8||10|
|Balance as of 12/31/2015||8,193||2,701||1,989||962||11||5,663||13,856|
|Balance as of 1/1/2014||256||1,050||920||736||–||2,706||2,962|
|Currency translation differences||3||18||27||36||–||81||84|
|Reversals of impairment losses||–||(1)||–||–||–||(1)||(1)|
|Reductions through disposal of investments||(18)||–||(14)||–||–||(14)||(32)|
|Reclassifications in accordance with IFRS 5||(26)||–||(21)||–||–||(21)||(47)|
|Reclassifications and other changes||(4)||2||6||(3)||–||5||1|
|Balance as of 12/31/2014||300||1,130||868||816||–||2,814||3,114|
|Currency translation differences||–||25||23||52||–||100||100|
|Reversals of impairment losses||–||(1)||(7)||–||–||(8)||(8)|
|Reductions through disposal of investments||(2)||(10)||(41)||–||–||(51)||(53)|
|Reclassifications in accordance with IFRS 5||–||(32)||(40)||(4)||–||(76)||(76)|
|Reclassifications according to IFRS 5||–||–||–||–||–||–||–|
|Reclassifications and other changes||–||(1)||1||–||–||–||–|
|Balance as of 12/31/2015||298||1,269||971||897||4||3,141||3,439|
|Carrying amount as of 12/31/2015||7,895||1,432||1,018||65||7||2,522||10,417|
|Carrying amount as of 12/31/2014||7,615||1,224||1,010||63||2||2,299||9,914|
Other rights and licenses include brands, supply rights, publishing rights and acquired software as well as other licenses. In the financial year, BMG acquired music catalogs in the amount of €134 million, €69 million of which relates to several music catalogs in the United Kingdom and €48 million to several music catalogs in the United States. Internally generated intangible assets mostly include own film and TV productions and internally generated software. As in the previous year, no intangible assets have been provided as collateral for liabilities.
Goodwill and other intangible assets are attributable to the following cash-generating units:
Goodwill and Other Intangible Assets with Indefinite Useful Life by Cash-Generating Units
|Goodwill||Other intangible assets|
with indefinite useful life
|in € millions||12/31/2015||12/31/2014||12/31/2015||12/31/2014|
|RTL Group, Group level||2,123||2,123||–||–|
|Penguin Random House||1,002||927||–||–|
|Penguin Random House Ventures||957||882||–||–|
|Random House Germany||45||45||–||–|
|Gruner + Jahr||471||439||–||–|
|Magazines and digital business |
Germany & MPS
|Magazines and digital business international||173||172||–||–|
|Be Printers Americas||24||22||–||–|
Intangible assets with an indefinite useful life are primarily Groupe M6 trademark rights in France (€120 million; previous year: €120 million). The relevant factors that apply when determining the useful life include, in particular, developments in the advertising and sales markets, consumers’ reading and leisure time behavior, changes in the technology or regulatory environment and management strategies to maintain the brands. In addition, in accordance with IAS 38.94, when determining the useful life, extension periods are included if the extension is possible without significant additional costs. Consideration of these factors and past experience with regard to these and comparable internally generated trademark rights and titles support the management’s estimate that there are currently no foreseeable restrictions on the ability to use these rights to the extent that they are capable of generating corresponding cash flows for the unit.
For the purpose of impairment testing (IAS 36), goodwill from a business combination is allocated to the cash-generating units that are expected to benefit from the synergies of the business combination. Goodwill is tested for impairment at least annually and whenever there is an indication that it may be impaired, as outlined in the “Accounting and Measurement Policies” section and under the following assumptions. The recoverable amount is the higher of fair value less costs of disposal and value in use.
Management estimates of cash flow are based on factors including assumptions of economic trends and the associated risks, the regulatory environment, the competitive environment, market share, investments, EBITDA margins and growth rates. With regard to the individual cash-generating units bearing material goodwill, the following assumptions relating to the market development for the beginning of the detailed planning period were applied:
- For the financial year 2016, slight growth is generally expected in the European TV advertising markets.
- The English-, Spanish- and German-language book markets are expected to show largely stable development.
- In the magazine business, the advertising markets and the sales markets are expected to continue to decline in Germany and France in the financial year 2016.
- In the financial year 2016, the services markets are expected to achieve growth similar to the financial year 2015.
- In 2016, the global music publishing market is expected to show continued slight growth.
- For the US education markets, continuing strong growth is expected in the relevant segments.
In addition, fair values were measured using the following individual business-specific growth rates and discount rates for periods after the detailed planning period:
Overview of Growth and Discount Rates
|Growth rate in % for the year 12/31/2015||Discount rate in % for the year 12/31/2015||Growth rate in % for the year 12/31/2014||Discount rate in % for the year 12/31/2014|
|RTL Group, Group level||2.0||6.9||2.0||7.6|
|Penguin Random House|
|Penguin Random House Ventures||0.5||8.4||0.5||8.3|
|Random House Germany||0.5||6.9||1.0||7.1|
|Gruner + Jahr|
|Magazines and digital business Germany & MPS||-0.8||6.0||-1.5||5.7|
|Magazines and digital business International||-0.5||7.5||-1.0||7.6|
|Be Printers Americas||-1.0||6.5||-1.0||6.5|
The recoverable amount for the impairment test for RTL Group’s goodwill recognized at the Group level was identified using the fair value less costs of disposal. The fair value is derived from the stock market price and is therefore based on level 1 of the fair value hierarchy. No impairment was identified for goodwill carried, and the validation with the business expectations confirms this estimate. The recoverable amount for the other cash-generating units of the RTL Group division equals the value in use.
For the cash-generating units of all other divisions, the recoverable amount equals the fair value, which is derived from discounted cash flows less costs of disposal, and which is based on level 3 of the fair value hierarchy. Projected cash flows were based on internal estimates for three detailed planning periods and generally two further detailed planning periods were applied in addition. For periods after this detailed horizon, a perpetual annuity was applied, taking into account individual business-specific growth rates.
During the reporting period, no impairment losses were recognized for goodwill (previous year: €-89 million). Impairment losses on goodwill and other intangible assets with indefinite useful lives are disclosed in the income statement under “Amortization/depreciation, impairment losses and reversals of intangible assets and property, plant and equipment.”
A new advertising tax was adopted by the Hungarian parliament on June 11, 2014. On July 4, 2014, the Hungarian parliament adopted several amendments which came into force on August 15, 2014. The tax is steeply progressive, with rates between zero and 40 percent, and is calculated, in general, on the net revenues derived from advertising plus the margins which the sales houses affiliated with the taxpayers charge to their customers. The tax base is calculated by aggregating the tax bases of the subsidiaries. As a result, entities belonging to a group of companies are taxed at higher tax rates than group-independent legal entities. On November 18, 2014, the Hungarian parliament adopted an amendment by which the highest applicable tax rate was increased from 40 to 50 percent. This amendment entered into force on January 1, 2015. As of June 30, 2014, RTL Group’s management had recognized a full impairment of the goodwill for an amount of €77 million and additional impairment losses on non-current intangible assets of €11 million, of which €9 million is related to assets identified in connection with the initial purchase price allocations. Furthermore, as of December 31, 2014, a valuation allowance on current program rights has been recorded for an amount of €7 million. On May 27, 2015, the Hungarian parliament retrospectively amended the advertising tax. The tax rate was changed into a flat rate of 5.3 percent for a tax base above HUF100 million and zero percent under HUF100 million. The retrospective impact resulted in a one-off positive impact of €5 million recognized in the position “Other operating expenses” as of December 31, 2015. In addition, RTL Group’s management reassessed the fair value of the non-current intangible assets identified in connection with the initial purchase price allocations and fully reversed the remaining impairment for an amount of €7 million. In addition, the reassessment of the net realizable value of the current program rights resulted in the recognition of a reversal of the valuation allowance of €5 million.
Due to continuing pressure on the production and distribution business as a result of lower volumes and pricing, the company’s internal forecasts for the cash-generating unit Fremantle Media, which belongs to RTL Group, have been updated taking into account the latest available information, primarily on the United States. The recoverable amount was determined using the value in use on the basis of the discounted cash flow method with a long-term growth rate of 2.5 percent (previous year: 2.5 percent) and a discount rate of 7.4 percent (previous year: 7.7 percent). As of December 31, 2015, the recoverable amount exceeds the carrying amount by €189 million (previous year: €124 million). In the event of an increase in the discount rate by 0.7 percentage points, a reduction in the annual revenue of 1.0 percent or a reduction in the EBITDA margin by 1.0 percentage point, the recoverable amount is lower than the carrying amount.
The significant increase of video views recorded in the year 2015 was not reflected in revenue growth of StyleHaul due to the delayed launch of certain diversification revenue streams, notably branded content revenue, and the lower revenue per thousand impressions (RPM). The recoverable amount was determined using the value in use with a longterm growth rate of 2.0 percent (previous year: 2.0 percent) and a discount rate of 13.0 percent (previous year: 13.9 percent). As of December 31, 2015, the recoverable amount exceeds the carrying amount on the level of StyleHaul by €11 million (previous year: €14 million). In the event of an increase in the discount rate by 0.7 percentage points, a reduction in the annual revenue of 1.4 percent or a reduction in the EBITDA margin by 2.4 percentage points, the recoverable amount is lower than the carrying amount.
As of December 31, 2015, the recoverable amount for the cash-generating unit BMG exceeds the carrying amount by €295 million (previous year: €357 million). In the event of an increase in the discount rate by 0.7 percentage points, a reduction in the long-term growth rate by 0.7 percentage points or a reduction in the EBITDA margin by 3.5 percentage points, the recoverable amount is lower than the carrying amount for the first time.
Other material goodwill was not subject to impairment even given a change by one of the two most important factors: discount rate (increase of 1.0 percentage point) and long-term growth rate (reduction of 1.0 percentage point).