Note 6. Investments in associates
The changes in the investment and associates are as follows:
|Levitech 2||Net equity share||Other (In)tangible assets||Goodwill||Total ASMPT||Total|
|Balance January 1, 2014||278||264,750||161,531||517,394||943,675||943,953|
|Share in net earnings of investments in associates||(278)||62,209||–||–||62,209||61,931|
|Other comprehensive income of investments in associates||–||(2,109)||–||–||(2,109)||(2,109)|
|Amortization recognized (in)tangible assets||–||–||(22,517)||–||(22,517)||(22,517)|
|Dilution ASMPT share to 39.75%||–||3,561||–||–||3,561||3,561|
|Allocation equity component convertible bond 1||–||9,947||–||–||9,947||9,947|
|Foreign currency translation effect||–||28,179||19,830||70,147||118,156||118,156|
|Balance December 31, 2014||–||346,563||158,844||587,541||1,092,948||1,092,948|
|Increase of interest||900||–||–||–||–||900|
|Share in net earnings of investments in associates||–||44,158||–||–||44,158||44,158|
|Other comprehensive income of investments in associates||–||567||–||–||567||567|
|Amortization recognized (in)tangible assets||–||–||(27,151)||–||(27,151)||(27,151)|
|Value reduction as resulting from start-up costs||(900)||–||–||–||–||(900)|
|Dilution ASMPT share to 39.55%||–||5,535||–||–||5,535||5,535|
|Foreign currency translation effect||–||21,214||18,169||68,264||107,647||107,647|
|Balance December 31, 2015||–||375,172||149,862||655,805||1,180,839||1,180,839|
- In 2014 convertible bonds were issued by ASMPT that containing both liability and conversion option components. These components are classified separately into respective items on initial recognition in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. The conversion option classified as equity is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognized and included in equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion option classified as equity will remain in equity until the conversion option is exercised.
- Investments reflects the net equity value of the interest in Levitech BV resulting from the management buy-out in 2009 of the RTP business. ASM International NV obtained a 20% interest in Levitech BV. In 2015 ASMI increased its interest to 24%. The value has been reduced in 2014 and 2015 due to (start-up) losses of Levitech caused by the introduction of their advanced products in the market.
On March 15, 2013, the Company divested a controlling stake in its subsidiary ASM Pacific Technology Ltd (ASMPT). After the initial accounting of the sale transaction and related gains future income from ASMPT was adjusted for the fair value adjustments arising from the 'basis differences' as if a business combination had occurred under IFRS 3R, 'Business Combinations', i.e. a purchase price allocation (PPA).
The purchase of the associate has been recognized at fair value, being the value of the ASMPT shares on the day of closing of the purchase transaction. The composition of this fair value was determined through a PPA. The PPA resulted in the recognition of intangible assets for customer relationship, technology, trade name, product names and goodwill. For inventories and property, plant & equipment a fair value adjustment was recognized.
The ASMPT investment is accounted for under the equity method on a go forward basis. Equity method investments are tested for prolonged impairment. An investment is considered impaired if the fair value of the investment is less than its carrying value.
If the fair value of an investment is less than its carrying value at the balance sheet date, the Company determines whether the impairment is temporary or prolonged. The amount per share recognized as per December 31, 2015 under equity accounting amounts to HK$62.27 whereas the level 1 fair value per share (being the market price of a share on the Hong Kong Stock Exchange) was HK$60.90 as per December 31, 2015. Management concluded that based on quantitative analysis no impairment of its share in ASMPT existed as per December 31, 2015.
In December 2015, 2,010,800 common shares of ASMPT were issued, for cash at par value of HK$0.10 per share, pursuant to the Employee Share Incentive Scheme of ASMPT. The shares issued under the plan in 2015 have diluted ASMI's ownership in ASMPT to 39.55% as of December 31, 2015.
At December 31, 2015, the book value of our equity method investment after the aforementioned impairment in ASMPT was €1,181 million. The historical cost basis of our 39.55% share of net assets on the books of ASMPT under IFRS was €375 million as of December 31, 2015, resulting in a basis difference of €806 million. €150 million of this basis difference has been allocated to property, plant and equipment and intangibles assets. The remaining amount was allocated to equity method goodwill. Each individual, identifiable asset will periodically be reviewed for any indicators of potential impairment. We amortize the basis differences allocated to the assets on a straight-line basis, and include the impact within the results of our equity method investments. Amortization and depreciation are adjusted for related deferred tax impacts. Included in net income attributable to ASMI for 2015 was after-tax expense of €27 million, representing the depreciation and amortization of the basis differences.
The market value of our 39.55% investment ASMPT at December 31, 2015 approximates €1,155 million.
Summarized 100% earnings information for ASMPT equity method investment excluding basis adjustments (foreign currency exchange rate per December 31, 2015 1 HK$: €0.119 for December 31, 2014: 1HK$: €0.106).
|Income before income tax||2,028||1,363|
|Other comprehensive income||(353)||(384)|
|Total comprehensive income||1,247||569|
Summarized 100% statement of financial position information for ASMPT equity method investment excluding basis adjustments (foreign currency exchange rate average 2015 1 HK$: €0.11852 for December 31, 2014: 1 HK$: €0.097).
Equity of ASMPT per December 31, 2015 translated into euro at a rate of 0.11852 was €952 million (our 39.55% share: €375 million)
The ASMPT Board is responsible for ongoing monitoring of the performance of the Back-end activities. The actual results of the Back-end operating unit are discussed with the ASMPT Audit Committee, which includes the representative of ASMI. The ASMI representative reports to the ASMI Management Board and the Audit Committee of ASMI on a quarterly basis.
Our share of income taxes incurred directly by the associates is reported in result from investments in associates and as such is not included in income taxes in our consolidated financial statements.