4 Goodwill and other intangible fixed assets

Movements in the goodwill and other intangible fixed assets are shown in the following table.

Goodwill impairment calculations are conducted annually in accordance with IAS 36. Per cash generating unit (cluster), the book value is checked against the realisable value. This realisable value is defined as the greater of the net realisable value according to the ‘value in use’ (VIU) methodology and net realisable value according to the ‘fair value less costs to sell’ (FVLCS) methodology.

In 2013, Q-Park merged its ten country organisations into four cluster organisations. The clusters are managed by the responsible cluster management teams each comprising a managing director and a financial director. The country management teams are managed by, report to and are evaluated by the cluster management teams.

Together with the introduction of the cluster organisations, we also introduced the European Management Team, consisting of the four managing directors of the clusters and the executive board. In response to the above, as from the 2013 financial year, Q-Park has defined its cash generating units at cluster level instead of country level. The comparative information for 2012 has been adjusted accordingly.

The clusters are defined as follows:

• Cluster Mid - Netherlands, Germany and Belgium;
• Cluster West - Great Britain and Ireland;
• Cluster South - France;
• Cluster North - Denmark, Sweden, Norway and Finland.

In so far as goodwill impairment based on the VIU is probable, Q-Park will investigate to what extent it is reasonable to assume that the realisable value based on the FVLCS is higher than the VIU. Ultimately, the book value of the cash generating unit is compared to the higher of the net realisable value according to VIU and net realisable value according to FVLCS. In 2013 and in 2012 it was established that the calculated VIU is higher than the FVLCS. Therefore, the calculations based on VIU were leading for the impairment calculations in both financial years.

In the VIU model, the future operational and investment cash flow has been discounted for a period of 15 years. The VIU calculated in this manner can be split into three parts:

• the cash flow in the first 4 years is based on the most recent business plan;
• the cash flow in years 5 to 15 is indexed with the average expected growth rate. This growth rate is based on the growth rate trend in the valuation of the investment property (this model also uses a 15-year cash flow projection);
• the residual value is calculated by dividing the cash flow in the last year by the weighted average cost of capital (WACC) minus the growth included in the calculation (WACC – g). The growth in the residual value is based on inflation expectations.

The total of these three components is discounted against the weighted average cost of capital (WACC) of each cash generating unit, resulting in the VIU.

The book value of the goodwill at the end of the financial year and the impairment result in the financial year are shown in the following table.

Up to and including the 2011 financial year, Q-Park NV conducted its goodwill impairment tests based on the so-called FVLCS according to the income approach. During 2012, the company received indications from the market that this FVLCS calculation according to the income approach no longer reflected the realisable value that an average market participant is willing to pay. Based on these indications, the company calculated the FVLCS according to the market approach in 2012. This FVLCS according to the market approach transpired to be lower than the book value of the cash generating units, which would have resulted in goodwill impairment. Consequently, in accordance with IAS 36, the VIU of the cash-generating units was calculated in addition to this FVLCS according to the market approach. This VIU transpired to be greater than the FVLCS according to the market approach and was therefore leading in the 2012 impairment test. In 2012, the test based on the VIU resulted in an overall impairment amounting to EUR -166.8 million.

In 2013, the impairment test based on the VIU has not resulted in impairments, but has resulted in a total negative headroom (difference between book value of Q-Park's shareholders' equity and the realisable value of the four cash generating units) amounting to EUR -342 million (2012: EUR -99 million). In both years, this can be mainly explained (2013: EUR -324, 2012: EUR -64 million) by inherent differences between the VIU of the four cash generating units and the sum of the (market) value of the individual investment properties which make up these cash flow generating units. These inherent differences are more broadly recognisable in the real estate sector.

The remainder of the negative headroom, EUR 18 million (2012: EUR 35 million), can be explained by the goodwill excluded from impairment testing. The goodwill arising from the acquisition of business combinations concerning the adjustment of the deferred tax liabilities from fair value to nominal value is not part of the goodwill included in the impairment test. At the end of the financial year this goodwill amounted to EUR 90.6 million (2012: EUR 92.2 million). This goodwill excluded from the impairment testing only changes due to exchange rate differences, changes in tax rates or following the sale of the investment property concerned.

The primary assumptions as applied in the goodwill impairment calculation are shown in the following table.

In addition to the assumptions in WACC and EBITDA growth, an average growth in the residual value of 2.0% (2012: 2.0%) is taken into account.

The following table shows a sensitivity analysis for three different scenarios and provides insight into the impact of changes in the WACC and growth assumptions on the impairment result in 2013.

When determining the impact as shown in the table above, we have abstracted from the possible effect that the adjustments would have on the value of the investment properties.

An increase in the WACC by 0.25% would have an impact on the impairment result of EUR -16.1million (2012: EUR -11.4 million). The impact of this adjustment on the realisable value of the total of the cash generating units amounts to EUR -112.5 million (2012: EUR -133.0 million).

A reduction in growth in years 5 to 15 by 0.5% would have an impact on the impairment results amounting to EUR -15.4 million (2012: EUR -10.5 million). The impact of this adjustment on the realisable value of the total of the cash generating units amounts to EUR -77.2 million (2012: EUR -119.9 million).

A reduction in growth of the residual value from 2.0% to 1.5% would have an impact on the impairment results amounting to EUR -11.5 million (2012: EUR -8.6 million). The impact of this adjustment on the realisable value of the total of the cash generating units amounts to EUR -94.1 million (2012: EUR -109.4 million).