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Note 4. Goodwill

The carrying amount of the goodwill is related to the acquisitions operations in the following business units:

 December 31,
Thermal products business unit2,6112,611
Plasma products business unit8,6598,659

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 a discounted future cash flow approach is used which makes use of 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 6.

The material assumptions used for the discounted future cash flows of the cash generating units (CGUs) are:

  • an average discount rate of 11.2% (2014: 13.0%) 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; and
  • cash flow calculations are limited to 4 years of cash flow; after these 4 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, 2015 the recoverable amount of the CGUs exceeded the carrying value. The excess was over 100% for each of the CGUs. 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.