NOTES
96•Consolidated financial statements
PANDORAANNUAL REPORT2014
BUSINESSCOMBINATIONS, CONTINUED
5.1
The agreement initially has a five-year term. On termination
of the agreement, PANDORAwill take over the full
distribution of PANDORA jewellery in Japan.The total
amount to be paid toBluebell will depend on the realised
revenue in 2019.The discounted fair value of the earn-out
isDKK 55million.
Intangible assets comprise reacquireddistribution rights
(remaining lifespan approximately three years) of DKK
29million.The fair value is based on comparison of peer
markets similar to the Japanesemarket and the EBITDA that
can be expected from similar stores in thesemarkets.
Inventories,DKK6million, havebeenmeasured at
market valuebasedon the saleabilityof the individual items.
Goodwill is attributable to the expected synergies from
combining PANDORA’swillingness and ability to invest in
the Japanesemarket withBluebell’s in-depth knowledge of
the Japanese retail market, Japanese consumers and insight
into the Japanese real estatemarket, to build a considerable
presence in Japan. None of the goodwill recognised is
deductible for income tax purposes.
Transaction costs, DKK 3million, have been recognised
as administrative expenses in profit or loss for 2014.
Acquisitionof PanMeA/S
On16 January 2015, PANDORA acquired 100% of the
shares in PanMeA/S. PanMeA/S holds the rights to
distribute PANDORA jewellery in theUAE, Bahrain, Qatar
andOman.
PANDORAhas paid the purchase price of DKK
110million primarily related to the rights to distribute
PANDORA jewellery in theUAE, Bahrain, Qatar and
Oman, aswell as non-current assets and inventories related
to 11 concept stores and three shop-in-shops in theUAE.
An amount of DKK 1million iswithheld until fulfilment of
certain conditions related to inventories.
Due to the late closing date of the acquisition, it has not
beenpractically possible toprepare the initial accounting
for the business combination.The purchase price allocation
for the acquisitionwill be included in the interim financial
report for the first quarter of 2015.
China
In February 2015, PANDORA entered an agreement with
Oracle Investment (Hong Kong) Limited (“Oracle”) about
joint distributionof PANDORA jewellery inChina from
1 July 2015 to 31December 2018. At the end of the
agreement, PANDORAwill take over the full distributionof
PANDORA jewellery inChina. On 1 July 2015, PANDORA
will, as part of the agreement withOracle, purchase the
majority of Oracle’s assets inChina.The agreement is
subject to certain conditions to be fulfilled.
Due to the subsequent closing date, it is not possible to
prepare the accounting for the business combination.
Accounting policies
Business combinations are accounted for using the
acquisitionmethod.The cost of an acquisition ismeasured
as the aggregate of the consideration transferred, measured
at acquisitiondate fair value and the amount of any non-
controlling interests in the acquiree.
For eachbusiness combination, the acquirermeasures
the non-controlling interests in the acquiree either at
fair value or at the proportionate share of the acquiree’s
identifiable net assets. Acquisition costs incurred are
expensed. Subsequent to initial recognition, goodwill is
measured at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill
acquired in a business combination is allocated to those
of PANDORA’s CGUs that are expected tobenefit from the
combination.Where goodwill forms part of aCGU and part
of the operationwithin that unit is disposed of, the goodwill
associatedwith the operation disposed of is recognised in
the carrying amount of the operationwhendetermining the
gain or loss ondisposal of the operation. Goodwill disposed
of in these circumstances ismeasuredbased on the relative
value of the operation disposed of and the portionof the
CGU retained.
If any part of the cost of an acquisition is contingent on
future events or achievements, this cost is recorded at fair
value at the time of acquisition.
SECTION 5: OTHER DISCLOSURES, CONTINUED
