Consumer products IFRS financial statements survey
Intangible assets drive performance
It's significant risk of impairment for CP companies to not respond to changing consumer tastes or spending patterns.
Brands and goodwill represent significant economic value for CP entities — in some instances, they amount to more than half of total assets.
Consumer product companies in our survey showed the following trends about intangible assets including goodwill.
- It's significant risk of impairment for CP companies to not respond to changing consumer tastes or spending patterns.
- For impairment testing purposes, goodwill is usually allocated to CGUs at or one level below a segment level. In many cases, the CGUs are defined by the brand structure and are used for both brand and goodwill impairment testing.
- The majority of CP entities apply either the relief-from-royalty method or a discounted cash flow method to value brands for the purpose of impairment testing. However, the parameters vary.
- Interest rates and growth rates are generally not comparable, as they are mostly determined individually depending on the business and geographical risks. Although desirable, detailed sensitivity analyses are not provided by a wide range of entities.
- Some CP entities in our survey included impairment losses arising from goodwill and brands within operating profit.
- Others, however, presented impairment losses separately as non-trading, non-operating, and non-recurring or as an exceptional item. Others split amortisation and impairments by function and subsume the losses within the functional headings.
Goodwill and brands — a major source of value
The following graphics illustrate the 20 companies' proportion of goodwill and brands compared with total assets and shareholders' equity.
Goodwill as percentage of total assets
Eight CP entities in our survey (eight in 2009) recognised goodwillthat accounted for from 25% to 50% of total assets.
Goodwill as percentage of shareholders' equity
Brands as percentage of total assets
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