19 Intangible assets
Goodwill, maintenance portfolios acquired from third parties, software, as well as rights, patents, and licenses, are recognized as intangible assets.
Intangible assets with finite useful lives are amortized on a straight-line basis over their useful life. The estimated useful life of intangible assets is as follows: for maintenance portfolios: 10 to 15 years; and for other intangible assets: 3 to 10 years.
Goodwill is not amortized but is tested for impairment annually or whenever there are indications that an impairment may have occurred.
For all other intangible assets, an impairment test is performedwhenever impairment indicators are identified. If the test reveals that the carrying amount exceeds the recoverable amount, the carrying amount is reduced accordingly. Impairment losses are recognized in the income statement.
| In CHF million | Goodwill | Maintenance portfolio | Other intangible assets | Total | ||||
|---|---|---|---|---|---|---|---|---|
| Net book values 2021 | ||||||||
| January 1, 2021 | 916 | 290 | 72 | 1 278 | ||||
| Additions | 15 | 15 | ||||||
| Amortization | –39 | –27 | –66 | |||||
| Business combinations | 64 | 97 | – | 161 | ||||
| Exchange differences | 6 | –4 | –1 | 1 | ||||
| December 31, 2021 | 986 | 344 | 59 | 1 389 | ||||
| Cost | 1 003 | 734 | 235 | 1 972 | ||||
| Accumulated amortization and impairment | –17 | –390 | –176 | –583 | ||||
| December 31, 2021 | 986 | 344 | 59 | 1 389 | ||||
| Net book values 2020 | ||||||||
| January 1, 2020 | 833 | 238 | 108 | 1 179 | ||||
| Additions | 11 | 11 | ||||||
| Amortization | –32 | –46 | –78 | |||||
| Impairment | – | – | –9 | –9 | ||||
| Business combinations | 138 | 93 | 6 | 237 | ||||
| Exchange differences | –55 | –9 | 2 | –62 | ||||
| December 31, 2020 | 916 | 290 | 72 | 1 278 | ||||
| Cost | 933 | 651 | 226 | 1 810 | ||||
| Accumulated amortization and impairment | –17 | –361 | –154 | –532 | ||||
| December 31, 2020 | 916 | 290 | 72 | 1 278 | ||||
Other intangible assets relate predominately to software, some of which has been internally developed. Development costs are capitalized when certain criteria are met. However, as experience shows that future economic benefits can usually only be proven when the products are successfully launched in the market, they are generally expensed in the income statement when incurred, consistent with research costs. In the reporting year, research and development costs of CHF 223 million were recognized in the income statement (previous year: CHF 204 million).
Goodwill impairment test
The value in use of the cash-generating units to which goodwill has been allocated is determined annually in the third quarter using the discounted cash flow method, or more frequently if any indication of impairment exists.
Future cash flows, pre-tax discount rates, and other parameters relating to the respective cash-generating units are determined using various assumptions. The estimate for the reportingyear and the forecast for the following three years generallyform the basis for the test. Assumptions such as market conditions, sales volumes, revenue, earnings before taxes, and tax rates are considered reasonable by management.
An impairment loss is recognized in the income statement if the carrying amount of the cash-generating unit exceeds the value in use. Impairment losses from earlier periods cannot be reversed.
The value in use calculations were based on the following assumptions:
| In CHF million | Goodwill | Pre-tax discount rate | Growth rate | Inflation rate | ||||
|---|---|---|---|---|---|---|---|---|
| As of December 31, 2021 | ||||||||
| China | 327 | 9.8% | 2.0% | 2.0% | ||||
| Germany | 240 | 5.9% | 2.1% | 2.1% | ||||
| Brazil | 91 | 22.0% | 3.3% | 3.3% | ||||
| Switzerland | 87 | 5.7% | 1.0% | 1.0% | ||||
| USA | 82 | 8.0% | 2.2% | 2.2% | ||||
| Others | 159 | |||||||
| Total | 986 | |||||||
| As of December 31, 2020 | ||||||||
| China | 307 | 11.7% | 2.6% | 2.6% | ||||
| Germany | 230 | 8.7% | 2.0% | 2.0% | ||||
| Brazil | 94 | 15.0% | 3.3% | 3.3% | ||||
| Switzerland | 84 | 7.6% | 1.0% | 1.0% | ||||
| USA | 62 | 9.4% | 2.2% | 2.2% | ||||
| Others | 139 | |||||||
| Total | 916 |
No impairment was necessary in the reporting year (previous year: no impairment). The item Others comprises 13 cash-generating units whose allocated goodwill is individually insignificant (previous year: 12).
The value in use of the cash-generating units to which goodwill has been allocated is reviewed for the impact of reasonably possible changes in key assumptions. In particular, an increase in the discount rate or a deterioration of future cash flow expectations is considered. These reasonably possible changes in key assumptions would not alter the results of the impairment test.