162 / 220
156
/
Annual Accounts /
Notes to the Consolidated Accounts
NOTE 19.
GOODWILL
Pubstone
Cofinimmo’s acquisition in two stages (31.10.2007 and 27.11.2008) of
89.90% of the shares of Pubstone Group SA/NV (formerly Express
Properties SA/NV) (see page 31 of the 2008 Annual Financial Report)
generated a goodwill for Cofinimmo resulting from the positive difference
between the acquisition cost and Cofinimmo’s share in the fair value of the
net asset acquired. More specifically, this goodwill results from:
•
the positive difference between the conventional value offered for
the property assets at the acquisition (on which the price paid for
the shares was based) and the fair value of these property assets
(being expressed after deduction of the transfer duties standing at
10.0% or 12.5% in Belgium and at 6.0% in the Netherlands);
•
the deferred tax corresponding to the theoretical assumption
required under IAS/IFRS of an immediate disposal of all the
properties at the closing date. A tax rate of respectively 34% and
25% for the assets located in Belgium and in the Netherlands has
been applied to the difference between the tax value and the market
value of the assets at the acquisition.
Cofinimmo Investissements et Services (CIS)
Cofinimmo’sacquisitionof100%ofthesharesofCofinimmo Investissements
et Services (CIS) SA (formerly Cofinimmo France SA) on 20.03.2008 gen-
erated a goodwill for Cofinimmo resulting from the positive difference
between the acquisition cost and the fair value of the net asset acquired.
More specifically, this goodwill results from the positive difference between
the conventional value offered for the property assets at the acquisition (on
which the price paid for the shares was based) and the fair value of these
property assets (being expressed after deduction of the transfer duties
standing at 1.8% and 6.2% in France).
Changes in the goodwill
(x €1,000)
Pubstone Belgium Pubstone Netherlands
CIS France
Total
Cost
AT 01.01.2013
100,157
39,250
26,929
166,336
AT 31.12.2013
100,157
39,250
26,929
166,336
Writedowns
AT 01.01.2013
14,380
1,600
15,980
Writedowns recorded during the financial year
19,000
2,000
21,000
AT 31.12.2013
33,380
3,600
36,980
Book value
AT 01.01.2013
85,777
37,650
26,929
150,356
AT 31.12.2013
66,777
35,650
26,929
129,356
Impairment test
At the end of the financial year 2013, the goodwill was subject to an impair-
ment test (executed on the groups of properties to which it was allocated
per country), by comparing the fair value of the properties plus the goodwill
to their value in use.
The fair value of the buildings is the value of the portfolio as established
by the independent real estate experts. This fair value is established using
three valuation methods: the ERV (Estimated Rental Value) capitalisation
approach, the expected cash flow approach and the residual valuation
approach. To carry out the calculation, the independent real estate experts
take as main assumptions the indexation rate, the discount rate and the
buildings’ estimated end-of-lease disposal value. These assumptions are
based on market observations taking into account investors’ expectations,
particularly regarding revenue growth and market risk premium. For fur-
ther information, see the Report of the Real Estate Experts of this Annual
Financial Report.
The value in use is established by the Group according to expected future
net cash flows based on the rents stipulated in the tenants’ leases, the
expenses to maintain and manage the property portfolio, and the expected
gains from disposals. The main assumptions are the indexation rate, the
discount rate, an attrition rate (number of buildings and corresponding
volume of revenues for which the tenant will terminate the lease, year
after year), as well as the buildings’ end-of-lease disposal value. These
assumptions are based on the Group’s knowledge of its own portfolio as
well as the yield expected from its equity.
Given the different methods used to calculate the fair value of the buildings
as established by the independent real estate experts and the value in use
as established by the Group, as well as the fact that the assumptions used
to calculate each of these may differ, the two values may not be the same
and the differences can be justified.
For 2013, the result of this test (illustrated in the table below) gives an
impairment of k€19,000 on the goodwill of Pubstone Belgium and an
impairment of k€2,000 on the goodwill of Pubstone Netherlands. For CIS
France, no impairment was recorded. During the financial year 2013, the fair
values of these three entities recorded positive changes of respectively
k€886, k€386 and k€2,906.
Assumptions used in the calculation of the value in use
of Pubstone
A projection of future net cash flows was drawn up for the remaining
duration of the lease bearing on the rents less the maintenance costs,
investments and operating expenses, as well as the proceeds from asset
disposalss.
During this remaining period, an attrition rate is taken into account based
on the terms of the lease signed with AB InBev. The buildings vacated are
assumed to have all been sold. At the end of the initial 27-year lease, a