Note 7. Goodwill
The changes in the carrying amount of goodwill are summarized as follows:
|Balance January 1, 2013||10,701||30,706||41,407|
|Foreign currency translation effect||(229)||(1,340)||(1,569)|
|Balance December 31, 2013||10,472||–||10,472|
|Foreign currency translation effect||683||–||683|
|Balance December 31, 2014||11,155||–||11,155|
The carrying amount of the goodwill is related to the acquisition of the following entities:
|ASM Microchemistry Oy (Thermal products business unit)||2,611||2,611|
|ASM Genitech Korea Ltd (Plasma products business unit)||7,861||8,544|
We perform an annual impairment test at December 31 of each year or if events or changes in circumstances indicate that the carrying amount of goodwill exceeds its recoverable amount. For the Front-end impairment test and the determination of the recoverable amount, the value in use method is used, based on a discounted future cash flow approach that uses our estimates of future revenues, driven by assumed market growth and estimated costs as well as appropriate discount rates.
For Back-end, goodwill is included in the investment value of ASMPT. For the impairment test reference is made to Note 3.
The material assumptions used for the fair value calculation of the reporting units are:
- an average discount rate of 13.0% (2013: 16.0%) representing the pre-tax weighted average cost of capital;
- external market segment data, historical data and strategic plans to estimate cash flow growth per product line have been used; and
- cash flow calculations are limited to five years of cash flow; after these five years perpetuity growth rates are set based on market maturity of the products. For maturing product the perpetuity growth rates used are 1% or less and for enabling technology products the rate used is 3% or less.
These estimates are consistent with the plans and estimated costs we use to manage the underlying business. Based on this analysis management concluded that as per December 31, 2014 the recoverable amount of the reporting units exceeded the carrying value. The excess was over 100% for each of the reporting units. Sensitivity analysis demonstrated that no reasonable possible change in estimated cash flows or the discount rate used in calculating the fair value would cause the carrying value of goodwill to exceed the fair value.