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Overview of activities, risk factors
2.7 Risk factors
DANONE
REGISTRATION DOCUMENT 2015
34
RISK IDENTIFICATION
RISK MONITORING AND MANAGEMENT
Unfavorable business performance and business
forecasts and impact on intangible asset
impairment tests and investments in associates
In connection with acquisitions involving groups or companies
that are fully consolidated or consolidated using the equity
method, a significant amount of the acquisition price could be
allocated to goodwill and to acquired brands with an indefinite
useful life. Specifically, a significant portion of the acquisition
price in connection with the Numico acquisition in 2007 (Early
Life Nutrition and Medical Nutrition) was allocated to goodwill
and acquired brands with an indefinite useful life, and the
same was true, albeit to a lesser extent, in connection with the
acquisitions of (i) the Unimilk group companies in 2010 (Fresh
Dairy Products, mainly Russia and Ukraine), and (ii) Centrale
Laitiere in 2013 (Fresh Dairy Products, Morocco).
Acquired goodwill and indefinite useful life brands are not
amortized. As with Investments in associates, they are subject
to an impairment test at least once a year and whenever events
or circumstances indicate that a reduction in value may have
occurred.
An unfavorable change in business activity, business activity
forecasts and assumptions used in the projection of cash-flows
for the purpose of the impairment tests, in particular with
respect to the goodwill and brands of the Early Life Nutrition
and Medical Nutrition Divisions arising from the Numico acqui-
sition, could result in the recognition of impairment charges,
which could then have significant adverse effects on Danone's
results. As for Investments in associates whose shares are
listed, a significant or extended decrease in their stock price
could also result in impairment charges that could adversely
affect Danone's results.
Danone draws up assumptions and business activity forecasts.
Each year, it prepares a strategic plan and an annual budget for
each subsidiary, analyzes them and, when deemed necessary,
draws up suitable action plans.
The principal intangible assets andmonitoring of their value are
described in Note 9 of the Notes to the consolidated financial
statements.
The principal Investments in associates and the monitoring of
their value are described in Note 4 of the Notes to the conso-
lidated financial statements.
Legal and regulatory risks
IDENTIFICATION OF THE RISK
RISK MONITORING AND MANAGEMENT
Intellectual property
Danone owns rights to brand names, registered designs
and patterns, copyrights and domain names throughout the
world. Intellectual property represents a significant portion
of Danone's net assets.
The territorial extent of the protection depends on the signifi-
cance of the products and activities concerned. The protection
is global for products intended for the international arena, and
local or regional for other products.
Danone also owns patents, licenses, proprietary recipes and
substantial expertise related to its products and packaging,
as well as to their manufacturing processes. Finally, Danone
has established licensing agreements with its subsidiaries and
partners that use these intellectual property rights.
Danone cannot be certain that third parties will not attempt to
infringe on its intellectual property rights. Moreover, Danone's
potential recourse to intellectual property rights protection
varies by country. The degree of protection may be different,
as may be Danone's implementation of a defense strategy. If
Danone was unable to protect its intellectual property rights
against such infringement or misuse, its results and growth
could be negatively affected, as could its reputation.
In order tomonitor its assets and ensure the protection, manage-
ment and defense of its rights in a coherent and optimal manner,
Danone has drawn up an “Intellectual Property” charter. Danone
regularly contacts each of its subsidiaries in order to update
its intellectual property rights portfolio and thereby protect
and defend, to the best of its ability, the brand names, graphic
design, forms, packaging, advertisements, websites, etc. that
are used by the Company. Danone also takes all appropriate
legal measures, notably through actions for infringement and/
or unfair competition, to protect and defend its intellectual
property rights at both international and local level.
Danone is continuing its efforts to develop awareness among
staff with access to and/or in possession of sensitive and/or
confidential information and provides updates to employees
on best practices with a view to limiting this risk, notably as
regards the use of information systems and social networks.