Danone // 2020 Universal Registration Document

4 93 DANONE UNIVERSAL REGISTRATION DOCUMENT 2020 4.1 Consolidated financial statements and notes to the consolidated financial statements Note 10. Intangible assets Note 10.2. Carrying amount and changes during the period 2019 2020 (in € millions) Notes Goodwill Brands (a) Other intangible assets Total Goodwill Brands (a) Other intangible assets Total Carrying amount As of January 1 17,711 6,359 376 24,445 18,125 6,329 348 24,803 Changes in consolidation scope 4.2 50 (25) (3) 22 66 − 48 114 Capital expenditure 10 4 62 75 − − 80 80 Disposals – – (1) (1) − − (2) (2) Translation adjustments 1.3 352 118 1 472 (1,273) (379) (21) (1,673) Impairment (b) 7.1, 10.3 (3) (140) (18) (161) (32) (288) (43) (363) Amortization charges − (3) (98) (101) − (2) (94) (97) Other 5 16 29 51 130 9 36 175 As of December 31 18,125 6,329 348 24,803 17,016 5,669 351 23,037 Of which gross amount 6,492 1,261 6,123 1,415 Of which amortization (23) (895) (25) (1,003) (a) Includes brands with indefinite useful lives and the other brands (€75 million as of December 31, 2020). (b) In 2020, the impairment losses relating to Other intangible assets with finite useful lives included a €33 million impairment provision in respect of customer relationships of the away-from-home segment resulting from the purchase price allocation process of the WhiteWave group companies acquired in 2017. This impairment reflects the effects of the pandemic crisis of Covid-19 on this segment. Note 10.3. Impairment review of goodwill and brands with indefinite useful lives Methodology The carrying amounts of goodwill and brands with indefinite useful lives are reviewed for impairment at least annually and whenever events or circumstances indicate that they may be impaired. These events or circumstances are linked to significant, unfavorable and lasting changes that have an impact on the economic environment and the assumptions or targets set at the time of acquisition. Impairment tests are carried out on all property, plant and equip- ment and intangible assets of the CGUs and groups of CGUs. When the carrying amount of all the property, plant and equipment and intangible assets of the CGUs and groups of CGUs becomes greater than their recoverable amount, an impairment provision is recognized and first charged against goodwill. The recoverable amount of the CGUs or groups of CGUs to which the tested assets belong is the higher of the fair value net of dis- posal costs, which is generally estimated on the basis of earnings multiples, and the value in use, which is assessed with reference to expected future discounted cash flows of the CGU or group of CGUs concerned. Annual impairment testing of brands with indefinite useful lives is based on an individual recoverable amount established using the royalties method, with the exception of certain brands for which the Group has a third-party valuation. In the case of the major brands, the Group re-estimates the royalty rate of the brands concerned in accordance with a method applied each year and based on the brand’s parameters including awareness of the brand, its profita- bility, market shares, etc. The cash flows used to determine value in use of the CGUs or groups of CGUs and the recoverable amount of the brands with indefinite useful lives are derived from the annual budgets and strategic plans of the CGUs or groups of CGUs, which are drawn up by Management and cover a period of two years, and are extended, where appropriate, on the basis of the most recent forecasts, to: • three to five years for the CGUs and groups of CGUs in the Waters and EDP Reporting Entities (with the exception of the emerging countries for which the forecasts cover eight years); • nine years for the Specialized Nutrition Reporting Entity, to better reflect the expected development of its activity on the estimation of the value in use. The Group uses projections over nine years to better reflect the Reporting Entity’s growth over this period, since the actual growth rate of these CGUs and groups of CGUs exceeds the long-term growth rate that the Group applies to each of these CGUs. Future cash flows beyond that period are extrapolated using a long- term growth rate that is specific to each CGU or group of CGUs: • the operational assumptions used to calculate the terminal value are in line with the last year of projections described above in terms of sales and recurring operating margin; • the long-term growth rate is determined for each CGU or group of CGUs taking into account its average growth rate in recent years and its geographical area (macro-economic fundamentals, demographics, etc.). Finally, future cash flows are discounted using the weighted ave- rage cost of capital method, according to which the cost of debt and the after-tax cost of equity are weighted based on their respective proportions in the business sector concerned. It is calculated for the Group and increased, for certain CGUs or groups of CGUs, by a premium to take into account the risk factors affecting certain countries.