Annual Report 2023

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G13 Intangible assets

2022

 

Internally generated intangible assets

Acquired intangible assets

Total

 

Capitalized R&D expenditure

IT software

Patents and licenses

Other

Subtotal

Capitalized R&D expenditure

IT software

Patents and licenses

Trademarks

Goodwill

Other

Subtotal

 

Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

January 1, 2022

4,155

3,156

273

159

7,744

621

1,099

1,434

2,264

34,278

10,117

49,817

57,560

Discontinued operations

–143

–195

0

–64

–402

–19

–72

–1

–18

–1,352

–34

–1,496

–1,898

Additions

209

442

9

–

661

187

82

9

–

–

7

285

946

Business combinations

–

–

–

–

–

43

135

230

478

10,552

3,755

15,193

15,193

Divestments and disposals

–4

–4

–5

–

–13

–

–45

–2

–

–

–10

–59

–72

Impairment losses

–

–

–

–

0

–

–

–

–

–88

–

–88

–88

Reclassifications

–

7

–6

6

7

–

37

–

–30

–

–22

–15

–8

Translation differences

162

93

24

13

291

66

65

192

307

4,182

1,371

6,182

6,474

December 31, 2022

4,380

3,499

294

114

8,287

899

1,301

1,863

3,001

47,572

15,184

69,820

78,107

Accumulated amortizations and impairment losses

 

 

 

 

 

 

 

 

 

 

 

 

 

January 1, 2022

3,261

2,205

157

119

5,742

244

728

488

415

–

2,135

4,011

9,752

Discontinued operations

–140

–161

–

–43

–345

–13

–58

–1

–3

–

–3

–78

–423

Divestments and disposals

–4

–4

–

–

–8

–

–44

–2

0

–

–11

–59

–67

Impairment losses

–

16

–

–

16

–

–

–

–

–

19

19

35

Reversal of impairment losses

–

–

–

–

–

–

–

–

–

–

–4

–4

–4

Reclassification

–

2

–3

0

–1

0

8

–1

–31

–

–19

–43

–44

Amortizations for the year

220

335

11

1

567

59

103

134

114

–

1,155

1,565

2,132

Translation differences

114

63

15

11

203

24

45

54

31

–

236

391

594

December 31, 2022

3,450

2,455

180

87

6,173

313

782

674

526

–

3,506

5,801

11,974

Net carrying amount

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2022

930

1,044

114

27

2,114

585

519

1,189

2,475

47,571

11,677

64,019

66,134
2023

 

Internally generated intangible assets

Acquired intangible assets

Total

 

Capitalized R&D expenditure

IT software

Patents and licenses

Other

Subtotal

Capitalized R&D expenditure

IT software

Patents and licenses

Trademarks

Goodwill

Other

Subtotal

 

Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

January 1, 2023

4,380

3,499

294

114

8,287

899

1,301

1,863

3,001

47,572

15,184

69,820

78,107

Additions

314

754

14

2

1,085

249

102

3

5

0

40

398

1,482

Business combinations

–

–

–

–

–

33

3

1

141

712

759

1,649

1,649

Divestments and disposals

–94

–35

0

0

–129

–1

–93

–25

0

–72

–13

–204

–333

Impairment losses

–

–

–2

–

–2

–

–

–

–13

–83

–77

–173

–174

Reclassifications

12

–20

–1

–7

–16

–12

87

–2

30

0

32

135

119

Translation differences

–28

26

–7

–6

–15

–18

–21

–57

–110

–1,474

–558

–2,238

–2,253

December 31, 2023

4,584

4,223

298

104

9,209

1,151

1,378

1,782

3,053

46,656

15,367

69,388

78,598

Accumulated amortizations and impairment losses

 

 

 

 

 

 

 

 

 

 

 

 

 

January 1, 2023

3,450

2,455

180

87

6,173

313

782

674

526

–

3,506

5,801

11,973

Divestments and disposals

–76

–35

0

0

–111

0

–78

–20

–

0

–11

–108

–220

Impairment losses

16

–

–

–

16

–

0

–

–

–

–

0

16

Reversal of impairment losses

–

–

1

–

1

–

–

–

–

–

0

0

1

Reclassifications

4

–16

–1

0

–14

–4

19

0

30

–

1

46

31

Amortization for the year

223

267

12

0

502

101

154

154

126

–

1,490

2,025

2,527

Translation differences

–17

21

–3

–5

–4

–7

–12

–27

–13

–

–162

–220

–224

December 31, 2023

3,599

2,691

189

83

6,561

404

866

780

669

0

4,825

7,544

14,104

Net carrying amount

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

985

1,532

110

21

2,648

747

512

1,002

2,384

46,656

10,542

61,844

64,495

Amortization for the year is included in the following lines in the income statement

 

2022

2023

Cost of goods and services sold

–569

–771

Selling expenses

–1,034

–1,284

Administrative expenses

–251

–205

Research & development

–278

–267

Total

–2,132

–2,527

Impairment losses/reversal of impairment losses per line in the income statement

 

2022

2023

Cost of goods and services sold

4

–16

Selling expenses

–18

–91

Administrative expenses

–4

0

Research & development

–12

–1

Other operating expenses

–88

–83

Total

–118

–191

Impairment tests of intangible assets

Intangible assets with a definite useful life were tested for impairment when an indication for impairment was identified. Intangible assets with an indefinite useful life are tested for impairment annually and whenever events or changes in circumstances indicates that the carrying amount has been impaired. The tests resulted in impairment losses of SEK 191 million (118).

Goodwill

Goodwill by cash-generating unit

 

Carrying amount

 

2022

2023

Sandvik Manufacturing and Machining Solutions

 

 

Walter Group

4,571

4,319

Seco Tools

576

621

Sandvik Coromant

4,370

4,016

Dormer Pramet

370

275

Business area level

15,489

15,166

Total

25,377

24,397

Sandvik Mining and Rock Solutions

 

 

Business area level

15,785

16,095

Total

15,785

16,095

Sandvik Rock Processing Solutions

 

 

Business area level

6,369

6,127

Total

6,369

6,127

Other Operations

41

39

Group total

47,572

46,657

Impairment tests of goodwill

As previously stated, the carrying amount of goodwill in the consolidated balance sheet is SEK 46,657 million (47,572), essentially related to a number of major business combinations.

In 2023, there were no changes to the business areas that have caused the cash generating units (CGUs) to change. That means that goodwill is tested for impairment on business area level for Sandvik Mining and Rock Solutions and Sandvik Rock Processing Solutions and on division/business area level for Sandvik Manufacturing and Machining Solutions with the following CGUs: Sandvik Coromant, Seco Tools, Dormer Pramet, Walter Group and Sandvik Manufacturing and Machining Solutions business area level. Consolidated goodwill is allocated to the CGUs stated above. The recoverable amount of all of the CGUs has been assessed based on estimates of value in use. Calculations of value in use are based on the estimated future cash flows using forecasts covering a four-year period, which are based on the business plans prepared annually by each of the business areas and approved by Sandvik Group Executive Management.

These plans are founded on the business areas’ strategies and an analysis of the current and anticipated business climate, and the impact this is expected to have on the market in which the business area operates. A range of economic indicators, which differ for each market, and external and internal studies of these, are used in the analysis of the business situation. The forecasts form the basis for how the values of the material assumptions are established. The assumptions mentioned below reflect past experience and the current and future situation and are consistent with external information. The most material assumptions when determining the value in use include anticipated demand, growth rate, operating margin, working capital requirements and the discount rate. Assumptions on growth rate and margins are at normal levels in relation to outcomes for most CGUs in recent years. The future revenues in 2024 are somewhat higher due to the acquisitions in 2023, but in 2025 and onwards the revenues and margins are assumed to be normalized.

The factor used to calculate growth in the terminal period after four years was 2 percent for all CGUs. Need of working capital beyond the four-year period is deemed to increase approximately at the same rate as the expected growth in the terminal period. The discount rate consists of a weighted average cost of capital for borrowed capital and shareholders’ equity. Sandvik calculates a pre-tax discount rate for each CGU, which varied between 9.7 percent and 11.2 percent; Sandvik Mining and Rock Solutions 11.2 percent (11.4), Sandvik Rock Processing Solutions 11.0 percent (11.7), Walter Group 11.0 percent (10.4), Seco Tools 10.0 percent (9.6), Sandvik Coromant 9.7 percent (9.4), Dormer Pramet 10.5 percent (9.9) and Sandvik Manufacturing and Machining Solutions 10.0 percent (9.8). The specific risks of the CGUs have been adjusted for future cash flow forecasts.

Goodwill attributable to Dormer Pramet amounting to SEK 83 million was written down in the second quarter due to a closure of a smaller business. The cost is booked in other operating expenses.

The impairment testing of goodwill performed during the fourth quarter 2023 did not indicate any impairment requirements. Sensitivity in the calculations implies that the goodwill value would be maintained even if the discount rate was increased by 2 percentage points or if the long-term growth rate was lowered by 2 percentage points. The goodwill value would also be maintained, given an operating margin drop of 2 percentage points.

§ Accounting principles

Intangible asset
Goodwill

Goodwill is allocated to CGUs that are expected to benefit from the synergies of the business combination. Goodwill arising on the acquisition of an associated company is included in the carrying amount of participation in associated companies.

Other intangible assets

Other intangible assets acquired by the company are recognized at cost less accumulated amortization and any impairment losses.

Capitalized expenditure for the development and purchase of software for the Group’s IT operations are included here.

Amortization of intangible assets

Amortization is charged to profit or loss for the year on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite.

The estimated useful lives are as follows:

  • Patents 10–20 years
  • Trademarks 3–20 years and some with indefinite useful life
  • Capitalized development costs 3–10 years
  • Software for IT operations 3 years
Borrowing costs

Borrowing costs attributable to the construction of qualifying assets are capitalized as a portion of the qualifying asset’s cost. A qualifying asset is an asset that takes a substantial time period to get ready for its intended use or sale. The Group considers a period in excess of one year to be a substantial time period. For the Group, the capitalization of borrowing costs relating to intangibles is mainly relevant for capitalized expenditure for the development of new data systems.

Cloud computing arrangements

Sandvik applies the IFRS IC’s agenda decision for cloud computing arrangements from 2021. Configuration or customization costs in cloud computing arrangements that Sandvik can control will be capitalized.

! Critical estimates and key judgments

Impairment tests of goodwill

Goodwill is tested for impairment annually and whenever events or changes in circumstances indicate that the carrying amount of goodwill has been impaired, for example due to a changed business climate or a decision taken either to sell or close down certain operations. In order to determine if the value of goodwill has been impaired, the CGU to which goodwill has been allocated must be valued using present value techniques. When applying these valuation techniques, the Company relies on a number of factors, including historical results, business plans, forecasts and market data. As can be deduced from this description, changes in the conditions for these judgments and estimates can significantly affect the assessed value of goodwill.

Impairment tests of other non-current assets

Sandvik’s intangible assets – excluding goodwill and certain trademarks– are stated at cost less accumulated amortization and any impairment losses. Other than goodwill and certain trademarks, Sandvik has not identified any intangible assets with indefinite useful lives. The assets are amortized over their estimated useful lives to their estimated residual values. Both the estimated useful life and the residual value are reviewed at least at each financial year-end.

The carrying amount of the Group’s non-current assets is tested for impairment whenever events or changes in circumstances indicate that the carrying amount will not be recovered. The carrying amount of intangible assets not yet available for use is tested annually. If such analysis indicates an excessive carrying amount, the recoverable amount of the asset is estimated. The recoverable amount is the higher of the asset’s fair value less selling costs, and its value in use. Value in use is measured as the discounted future cash flows of the asset, alternatively the CGU to which the asset belongs.

A call for an impairment test also arises when a non-current asset is classified as being held for sale, at which time it must be remeasured at the lower of its carrying amount and fair value less costs to sell.

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Balance sheet