4.6 Goodwill
CHF million | Goodwill |
|---|---|
Carrying amount at January 1, 2023 | 193.8 |
Currency translation differences | – 9.5 |
Carrying amount at December 31, 2023 | 184.3 |
Cost at December 31, 2023 | 184.3 |
Accumulated impairment at December 31, 2023 | 0.0 |
Carrying amount at December 31, 2023 | 184.3 |
Acquisitions1 | 5.0 |
Currency translation differences | 2.7 |
Carrying amount at December 31, 2024 | 192.0 |
Cost at December 31, 2024 | 192.0 |
Accumulated impairment at December 31, 2024 | 0.0 |
Carrying amount at December 31, 2024 | 192.0 |
1See note 2.1.
Goodwill is allocated to the corresponding cash-generating unit (CGU) and monitored by management. Rieter tests whether goodwill has suffered any impairment on an annual basis. For 2024 and 2023, the recoverable amount of the CGUs was determined on value-in-use calculations.
A segment-level summary of the goodwill allocation, the CGU, and the respective key assumptions used, are presented below:
CHF million | Machines & Systems | SSM | Accotex | Temco | Bräcker | After Sales | 2024 |
|---|---|---|---|---|---|---|---|
Machines & Systems | 57.0 | – | – | – | – | – | 57.0 |
Components | – | 43.5 | 16.2 | 19.7 | 5.0 | – | 84.4 |
After Sales | – | – | – | – | – | 50.6 | 50.6 |
Goodwill | 192.0 | ||||||
Key assumptions: | |||||||
Sales volume (% growth) | – | 18.7% | 10.6% | 12.2% | – | – | |
Long-term sales growth rate | 1.7% | 1.5% | 2.0% | 2.0% | – | 1.8% | |
Pre-tax discount rate | 14.2% | 12.9% | 14.1% | 12.2% | – | 13.2% |
CHF million | Machines & Systems | SSM | Accotex | Temco | After Sales | 2023 |
|---|---|---|---|---|---|---|
Machines & Systems | 56.1 | – | – | – | – | 56.1 |
Components | – | 43.5 | 15.9 | 19.3 | – | 78.7 |
After Sales | – | – | – | – | 49.5 | 49.5 |
Goodwill | 184.3 | |||||
Key assumptions: | ||||||
Sales volume (% growth) | – | 16.5% | 6.5% | 5.4% | – | |
Long-term sales growth rate | 1.9% | 1.7% | 2.0% | 1.9% | 2.0% | |
Pre-tax discount rate | 14.8% | 13.7% | 14.9% | 12.8% | 14.4% |
Based on the performed impairment tests using the key assumptions mentioned above, there is no need for an impairment charge at December 31, 2024 and 2023.
Goodwill allocated to CGUs Machines & Systems and After Sales contains the goodwill from the automatic winding machine business acquired in 2022, including the goodwill from the winder-related service and commission business in India acquired in 2021. Gross profit and cash flows depend on sales volume and sales growth. The results of both impairment tests confirm the purchase price paid without an indication for impairment. No reasonably possible changes in key assumptions would cause the recoverable amount to equate the carrying amount of goodwill.
Regarding SSM, there is currently no indication of a long-term decrease of the market share or profitability. Gross profit and cash flows depend on sales volume and sales growth. No reasonably possible changes in key assumptions would cause the recoverable amount to fall short of the carrying amount of goodwill.
Regarding Accotex and Temco, there is currently no indication of a long-term decrease in the market, the market share, or the profitability. Gross profit and cash flows depend on sales volume and sales growth. The results of the impairment tests confirm the purchase price paid without an indication for impairment, but showed only a small headroom for Accotex. Rieter performed sensitivity analysis in order to determine which reasonably possible changes in key assumptions would cause the recoverable amount to fall short of the carrying amount of goodwill.
The sensitivity analysis for Accotex showed that the recoverable amount would fall short of the carrying amount of Accotex if the pre-tax discount rate would be increased by 2.0 percentage points (2023: +0.7 percentage points), the sales volume growth would be reduced by 3.4 percentage points (2023: -0.8 percentage points), or the long-term sales growth rate would be decreased by 2.2 percentage points (2023: -0.8 percentage points). The recoverable amount of Accotex exceeds the carrying amount by CHF 7.9 million (2023: CHF 2.7 million). The sensitivity analysis for Temco showed that no reasonably possible changes in key assumptions would cause the recoverable amount to fall short of the carrying amount of goodwill.
Sales growth rates are calculated as compound average growth rate derived from the underlying business plans. Long-term sales growth rates are based on long-term inflation assumptions assuring rates are in line or below external market information provided by industry specialists. Pre-tax discount rates are determined on the basis of the weighted cost of capital using market participants information.
Significant accounting estimates and judgments
For the goodwill impairment test, Rieter uses financial plans for the next four years as approved by the Board of Directors and the Group Executive Committee. These plans are extrapolated to a period of five years. Management thereby makes assumptions related to sales growth rates and profit margins. Expected future cash flows are discounted with a market-specific discount rate. The earthquake in Türkiye and the global economic and geopolitical uncertainties (see note 2.4) have been reflected appropriately in these assumptions in 2024 and 2023.
Material accounting policies
Goodwill resulting from business combinations represents the difference between the purchase considerations paid and the fair value of net assets acquired. Due to its indefinite useful life, it is subject to an impairment test performed at least on an annual basis.