Balance Sheet Disclosures

Favourable contracts were recognised as intangible assets if contracts were taken over in connection with a business combination whose terms and conditions were more favourable than the market conditions at the date of the business combination.

The additions to customer relationships resulted primarily from the first-time consolidation of REWE Dortmund SE & Co. KG, Dortmund, (see also note 4 "Acquisitions" for this and for all other additions from acquisitions).

Internally generated intangible assets in use amounting to 89.7 million euros are presented in the financial year (previous year: 66.4 million euros). In addition, there are internally generated intangible assets still in development. The internally generated intangible assets primarily concern software products. Additional research and development expenses of 70.4 million euros (previous year: 59.1 million euros) were incurred in the financial year. These expenses were not capitalised as internally generated intangible assets because the recognition requirements were not satisfied.

The cumulative cost and/or cumulative depreciation was reclassified if it was attributable to assets that were recognised under other items of non-current assets and that must now be presented in other items.

With regard to the impairment losses during the financial year, please see the remarks under note 13 "Depreciation, Amortisation and Impairments".

As in the previous year, no intangible assets were pledged as collateral for liabilities. In addition, purchase commitments in the amount of 0.3 million euros (previous year: 0.7 million euros) were entered into for intangible assets.

The National Full-Range Stores and National Discount Stores business segments were combined during the financial year to form the new Retail Germany business segment as part of the project to implement the new management structure. The goodwill formerly allocated to the former CGU National Full-Range Stores was allocated in full to the new REWE group of CGUs according to expected synergy potential and future management. Due to the adjustment in the percentage share in the Supermärkte Nord companies during the financial year, the goodwill allocated to the National Full-Range Stores group of CGUs was increased with retrospective effect from the previous year by 19.3 million euros to 186.3 million euros (see note 4 "Acquisitions"). 

The significant increase in goodwill for the REWE group of CGUs during the financial year was due primarily to the acquisition of 64 store locations and a logistics facility of the Kaiser's Tengelmann Group and the establishment of the joint venture with REWE DORTMUND Großhandel eG, Dortmund. The acquisition of the stores resulted in goodwill amounting to 60.3 million euros as at the balance sheet date, and the formation of the joint venture resulted in goodwill amounting to 1.6 million euros reflecting the expected synergy potential and advantageous locations for the REWE group of CGUs (see also note 4 "Acquisitions").

At the PENNY Czech Republic CGU group, the advantageous exchange rate changes resulted in an increase in goodwill of 11.0 million euros. 

Following the elimination of the goodwill for the PENNY Italy CGU group during the previous year, the acquisition of seven grocery store chains during the financial year resulted in goodwill in the amount of 8.8 million euros (see also note 4 "Acquisitions").

The decline in goodwill amounting to 4.7 million euros at the Travel and Tourism Central Europe group of CGUs was due primarily to a negative exchange rate development for the KUONI Switzerland business unit. At the Travel and Tourism Northern Europe CGU group, too, the negative exchange rate changes resulted in a decrease in goodwill of 2.1 million euros overall.

The advantageous exchange rate development from the previous year for the BILLA Russia group of CGUs reversed during the financial year, resulting in a decrease in goodwill amounting to 4.3 million euros. This was offset by the advantageous exchange rate trend for the BILLA Czech Republic group of CGUs, which resulted in a 3.0 million euro increase.

The addition of goodwill amounting to 1.0 million euros at the toom Baumarkt CGU group resulted from the acquisition of three store locations. 

The recoverable amount of the CGU groups is determined based on the fair value less costs to sell using the discounted cash flow method. 

The key measurement parameters used to calculate the fair value of CGUs are the capital charges (WACC) used to calculate the discount rate, the growth discount in the discount rate used for calculating the perpetual annuity and the change in EBIT in the planning period as the basis for forecasting the cash flows of the CGUs. 

The measurement of the fair value of the CGU groups is based on the forecasted cash flows, which are derived on the basis of the three-year plan approved by the management. This three-year plan was prepared on the basis of internal Company experience and expectations regarding future market development and is used for internal purposes. Country-specific parameters, such as economic growth, consumer prices, private consumption and the unemployment rate, are considered in the three-year plan. The last planning year in the three-year plan is generally used as a basis for the perpetual annuity in the measurement model.

A growth discount is factored into the discount rate for the perpetual annuity in the measurement model. Growth rates forecast by international organisations for gross domestic product up to 2022 were used when determining the country-specific growth discounts. The discount rates used reflect the special risks of the corresponding CGU groups. Capital charges (WACC) are determined based on fair values. The specific beta coefficients were derived from capital market data for several comparable companies. 

Impairment tests were conducted in euros for the Travel and Tourism Central Europe and Travel and Tourism Northern Europe groups of CGUs and average discount and growth rates were used; the average of the country-specific parameters was calculated based on revenue ratios. In the previous year, measurement models with country-specific parameters were added up for these CGU groups.

The three-year plans for internal management purposes are used for the forecast of future cash flows of the CGU groups. The detailed planning period was expanded for some CGU groups. This is done if the most recent budget year does not reflect long term results as a basis for the perpetual annuity. This is primarily due to restructuring and expansion plans in the CGU groups.

The following assumptions were made in the detailed planning period with respect to the future development of EBIT and revenue for the individual CGU groups:

As part of sensitivity analyses, the potential effects from changes in the weighted cost of capital (WACC), country-specific growth discounts or in the EBIT for the last planning year are analysed, as are combinations of these significant measurement parameters to future cash flows.

At the following CGU groups, the sensitivity analyses showed the potential impairments of goodwill in the event of changes in parameters presented in the table below:

No realistic changes in parameters are expected for any of the CGU groups which would result in an impairment.