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NOTES
96 • Consolidated financial statements
PANDORA ANNUAL REPORT 2016
SECTION 3: INVESTED CAPITAL AND WORKING CAPITAL ITEMS, CONTINUED
3.1 INTANGIBLE ASSETS, CONTINUED
Goodwill and distribution rights are allocated to 14 CGUs.
The recoverable amount is based on a calculation of the
value in use using cash flow estimates based on budgets
and expectations for the next three years. The long-term
growth rate in the terminal period has been set so that it
equals the expected long-term rate of inflation.
The brand is applied and supported globally in all of
the Group’s entities. The brand is maintained and preserved
through common strategy and product development at Group
level and marketing in the individual sales entities. The brand
is consequently tested for impairment at Group level. The
calculations of the recoverable amounts of CGUs or groups of
CGUs are based on the following key assumptions:
Discount rates reflect the current market assessment of
the risks specific to each CGU. The Group discount rates have
been estimated based on a weighted average cost of capital
for the industry. The rates have further been adjusted to reflect
the market assessment of any risk specific to each CGU.
The EBIT figures used in the impairment test are based
on the budget for next year, prepared and approved by
Management, and the expectations for the two subsequent
years.
The EBIT margin in the budget of the individual CGU is
based on historical experience and expectations concerning:
• revenue growth taking into account development
in network (store openings, retail/wholesale share),
product mix and market share
• cost of sales based on raw materials consumption
effected by mix of materials (stones, gold, silver and
salaries) and average lagged hedge commodity prices at
the time the budget is prepared
• development in operating expenses
• currency rates are based on actual rates at the time the
budget is prepared.
Net working capital in the budget for next year, relative to
the revenue of the individual CGUs, is based on historical
experience and is maintained for the remainder of the
expected lives. The net working capital is thus increased on
a linear basis as the level of activity increases.
The impairment tests did not show any need for
impairment losses to be recognised. Based on sensitivity
analyses, it is Management’s opinion that no probable
change in any key assumptions would cause the carrying
amount of the CGUs or groups of CGUs to exceed the
recoverable amount.
Discount rate
Growth rate in
Discount rates and growth rates in terminal period
before tax
the terminal period
2016
US and Caribbean
10.9%
2%
Other Americas
9.9%-21.3%
2%-8%
Northern Europe
8.4%
2%
Other EMEA
9.8%-16.7%
2%
Asia
7.3%-12.3%
2%
Pacific
11.4%
2%
Group
11.2%
2%
2015
North American
11.4%
2%
South Americas
55.5%
2%
Western Europe
9.6%
2%
Central Western Europe
10.1%
2%
Central Eastern Europe
13.0%
2%
Distributors and Travel Retail
10.4%
2%
Pacific
11.5%
2%
Asia
10.0%
2%
Group
11.3%
2%