10. Intangible Assets

CHF million

 

EDP software & consultancy

 

Customer relationships

 

Brands & IP

 

Goodwill

 

Other intangible assets

 

Intangible assets in progress

 

2022
Total

Acquisition costs as at January 1, 2022

 

133.8

 

122.1

 

460.3

 

731.8

 

3.4

 

15.6

 

1,467.0

Additions

 

17.0

 

–

 

–

 

–

 

–

 

11.6

 

28.6

Retirements

 

–8.8

 

–

 

–

 

–

 

–0.1

 

–

 

–8.9

Transfers

 

17.3

 

–

 

–

 

–

 

0.3

 

–17.0

 

0.6

Currency translation

 

–3.0

 

1.5

 

–

 

8.3

 

–0.1

 

0.4

 

7.1

Acquisition costs as at December 31, 2022

 

156.3

 

123.6

 

460.3

 

740.1

 

3.5

 

10.6

 

1,494.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated amortization as at January 1, 2022

 

95.2

 

59.7

 

–

 

–

 

3.3

 

–

 

158.2

Additions

 

16.3

 

8.5

 

–

 

–

 

–

 

–

 

24.8

Impairments

 

0.4

 

–

 

–

 

–

 

–

 

–

 

0.4

Retirements

 

–8.6

 

–

 

–

 

–

 

–0.1

 

–

 

–8.7

Transfers

 

0.1

 

–

 

–

 

–

 

0.2

 

–

 

0.3

Currency translation

 

–2.2

 

0.4

 

–

 

–

 

–

 

–

 

–1.8

Accumulated amortization as at December 31, 2022

 

101.2

 

68.6

 

–

 

–

 

3.4

 

–

 

173.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net intangible assets as at December 31, 2022

 

55.1

 

55.0

 

460.3

 

740.1

 

0.1

 

10.6

 

1,321.2

CHF million

 

EDP software & consultancy

 

Customer relationships

 

Brands & IP

 

Goodwill

 

Other intangible assets

 

Intangible assets in progress

 

2023
Total

Acquisition costs as at January 1, 2023

 

156.3

 

123.6

 

460.3

 

740.1

 

3.5

 

10.6

 

1,494.4

Additions

 

13.3

 

–

 

–

 

–

 

0.1

 

7.9

 

21.3

Retirements

 

–6.7

 

–

 

–

 

–

 

–

 

–

 

–6.7

Transfers

 

7.7

 

–

 

–

 

–

 

–

 

–8.2

 

–0.5

Currency translation

 

–11.0

 

–11.6

 

–

 

–69.4

 

–0.2

 

–0.7

 

–92.9

Acquisition costs as at December 31, 2023

 

159.6

 

112.0

 

460.3

 

670.7

 

3.4

 

9.6

 

1,415.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated amortization as at January 1, 2023

 

101.2

 

68.6

 

–

 

–

 

3.4

 

–

 

173.2

Additions

 

17.4

 

8.0

 

–

 

–

 

–

 

–

 

25.4

Impairments

 

0.2

 

–

 

–

 

–

 

–

 

–

 

0.2

Retirements

 

–6.7

 

–

 

–

 

–

 

–

 

–

 

–6.7

Transfers

 

–

 

–

 

–

 

–

 

–

 

–

 

–

Currency translation

 

–6.5

 

–7.0

 

–

 

–

 

–0.2

 

–

 

–13.7

Accumulated amortization as at December 31, 2023

 

105.6

 

69.6

 

–

 

–

 

3.2

 

–

 

178.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net intangible assets as at December 31, 2023

 

54.0

 

42.4

 

460.3

 

670.7

 

0.2

 

9.6

 

1,237.2

Customer relationships of CHF 42.4 million (CHF 55.0 million in prior year) relate to the acquisition of Russell Stover Chocolates, LLC in 2014 and have a remaining useful life of 6 years. The same applies for the largest share of CHF 459.8 million of the position “brands and intellectual property” (“IP”)(CHF 459.8 million in prior year) as well as the majority of goodwill, whereof CHF 660.0 million of the total CHF 670.7 million (CHF 728.6 million of CHF 740.1 million in prior year) relate to the acquisition of Russell Stover Chocolates, LLC. Both positions have an indefinite useful life. The remaining goodwill of CHF 10.7 million (CHF 11.5 million in prior year) relates to the acquisition of Lindt & Sprüngli Retail S.r.l., which has been merged with Lindt & Sprüngli S.p.A. in January 2022.

Research and development expenditures amounted to CHF 19.9 million (CHF 18.4 million in prior year) and are expensed as incurred.

Impairment test of goodwill and other intangible assets with infinite life segment “North America”

The impairment test of goodwill and other intangible assets with infinite life (i. e., “brands and intellectual property”) relates to the acquisition of Russell Stover Chocolates, LLC in 2014 and is performed on the operating segment “North America”. The impairment test of the position “brands and intellectual property” is, on one hand also performed on the segment “North America” and, on the other hand, performed on a stand-alone basis for the position brand and intellectual property only. The impairment test of goodwill is done using the discounted cash flow method, while the test for the brand and intellectual property is based on license income (“licence income approach”). Once the values-in-use are derived, these are compared against the carrying amounts.

The recoverable amount equals to the net present value of discounted future cash flows. It was determined based on planning assumptions over the next years plus a residual value. The planning assumptions are based on budget and mid-term plans, adjusted for, example given, expansion investments to ensure assets are only considered in their status quo. The EBIT-margin is based on historical data and industry specific benchmarks of the Lindt & Sprüngli Group. The discount rate reflects time value of money and characteristic risks for the asset being tested for impairment. The terminal growth rate is adjusted for inflation.

The main planning assumptions are summarized as follows:

 

 

2023

 

2022

Period of cash flow projections

 

5 years

 

5 years

Annual sales growth1

 

8.5%

 

7.7%

Annual EBIT-margin evolution

 

Improvement

 

Improvement

Terminal growth

 

2.2%

 

2.5%

Discount rate

 

7.2%

 

7.9%

1

The above presented annual sales growth is based on mid-term plans. According to IAS 36, this sales growth figure must then be adjusted for capacity expansion investments in the impairment test. Therefore, an adjusted growth of 5.6% (5.9% in prior year) is used solely for the purpose of the calculations in the impairment test.

Moreover, a sensitivity analysis is conducted in the goodwill impairment test. The following changes (increases and decreases) in the main planning assumptions are elaborated:

  • Discount rate post tax 80 basis points
  • Terminal growth 40 basis points
  • Annual sales growth 200 basis points
  • EBIT-margin evolution 200 basis points

No impairment need was identified in any of the sensitivity simulations.

Impairment test of goodwill division “Retail Italy”

In addition, the goodwill of CHF 10.7 million (CHF 11.5 million in prior year), stemming from the purchase of the Lindt & Sprüngli related retail operations of S.T. SpA in 2020 has been tested for impairment. The impairment test is performed on the level of the division “Retail Italy” and is as well done using the discounted cash flow method.

The impairment test and the conducted sensitivity analysis confirmed that no impairment is required. Even if key assumptions were to worsen by partly up to 200 basis points, there is no need for impairment.

Due to its immateriality and since an impairment is very unlikely, further disclosures regarding the applied assumptions in the impairment test are omitted.