G12 Intangible assets
|
Internally generated intangible assets |
Acquired intangible assets |
Total |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Capitalized R&D expenditure |
IT software |
Other |
Subtotal |
Capitalized R&D expenditure |
IT software |
Patents and licenses |
Trademarks |
Goodwill |
Other |
Subtotal |
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2023 |
4,380 |
3,499 |
408 |
8,287 |
899 |
1,301 |
1,863 |
3,001 |
47,572 |
15,184 |
69,820 |
78,107 |
Additions |
314 |
754 |
16 |
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 |
–129 |
–1 |
–93 |
–25 |
0 |
–72 |
–13 |
–204 |
–333 |
Impairment losses |
– |
– |
–2 |
–2 |
– |
– |
– |
–13 |
–83 |
–77 |
–173 |
–174 |
Reclassifications |
12 |
–20 |
–8 |
–16 |
–12 |
87 |
–2 |
30 |
0 |
32 |
135 |
119 |
Translation differences |
–28 |
26 |
–13 |
–15 |
–18 |
–21 |
–57 |
–110 |
–1,474 |
–558 |
–2,238 |
–2,253 |
December 31, 2023 |
4,584 |
4,223 |
402 |
9,209 |
1,151 |
1,378 |
1,782 |
3,053 |
46,656 |
15,367 |
69,388 |
78,598 |
Accumulated amortizations and impairments losses |
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2023 |
3,450 |
2,455 |
267 |
6,173 |
313 |
782 |
674 |
526 |
– |
3,506 |
5,801 |
11,973 |
Divestments and disposals |
–76 |
–35 |
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 |
–14 |
–4 |
19 |
0 |
30 |
– |
1 |
46 |
31 |
Amortization for the year |
223 |
267 |
12 |
502 |
101 |
154 |
154 |
126 |
– |
1,490 |
2,025 |
2,527 |
Translation differences |
–17 |
21 |
–8 |
–4 |
–7 |
–12 |
–27 |
–13 |
– |
–162 |
–220 |
–224 |
December 31, 2023 |
3,599 |
2,691 |
272 |
6,561 |
404 |
866 |
780 |
669 |
0 |
4,825 |
7,544 |
14,104 |
Net carrying amount |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2023 |
985 |
1,532 |
131 |
2,648 |
747 |
512 |
1,002 |
2,384 |
46,656 |
10,542 |
61,844 |
64,495 |
|
Internally generated intangible assets |
Acquired intangible assets |
Total |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Capitalized R&D expenditure |
IT software |
Other |
Subtotal |
Capitalized R&D expenditure |
IT software |
Patents and licenses |
Trademarks |
Goodwill |
Other |
Subtotal |
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2024 |
4,584 |
4,223 |
402 |
9,209 |
1,151 |
1,378 |
1,782 |
3,053 |
46,656 |
15,367 |
69,388 |
78,598 |
Additions |
245 |
685 |
34 |
964 |
238 |
42 |
7 |
– |
– |
24 |
311 |
1,276 |
Business combinations |
– |
– |
– |
– |
9 |
5 |
5 |
1,014 |
1,848 |
814 |
3,695 |
3,695 |
Divestments and disposals |
–9 |
–29 |
– |
–38 |
–1 |
–57 |
–14 |
–34 |
–78 |
–190 |
–375 |
–413 |
Impairment losses |
– |
– |
–59 |
–59 |
– |
– |
– |
– |
– |
–5 |
–5 |
–64 |
Reclassifications |
118 |
–1 |
–5 |
112 |
– |
59 |
–8 |
– |
– |
135 |
185 |
298 |
Translation differences |
101 |
11 |
19 |
132 |
45 |
36 |
118 |
270 |
2,753 |
910 |
4,133 |
4,265 |
December 31, 2024 |
5,039 |
4,890 |
391 |
10,321 |
1,443 |
1,463 |
1,890 |
4,303 |
51,181 |
17,055 |
77,333 |
87,655 |
Accumulated amortizations and impairment losses |
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2024 |
3,599 |
2,691 |
272 |
6,561 |
404 |
866 |
780 |
669 |
– |
4,825 |
7,544 |
14,104 |
Divestments and disposals |
–3 |
–29 |
– |
–34 |
– |
–51 |
–10 |
–1 |
– |
–2 |
–65 |
–99 |
Impairment losses |
41 |
103 |
– |
143 |
– |
– |
– |
7 |
– |
– |
7 |
150 |
Reclassifications |
74 |
2 |
–74 |
2 |
– |
1 |
– |
– |
– |
90 |
92 |
94 |
Amortization for the year |
218 |
194 |
12 |
425 |
119 |
166 |
138 |
146 |
– |
1,499 |
2,068 |
2,493 |
Translation differences |
67 |
5 |
11 |
84 |
18 |
25 |
54 |
53 |
– |
352 |
501 |
587 |
December 31, 2024 |
3,996 |
2,966 |
222 |
7,184 |
540 |
1,008 |
962 |
874 |
– |
6,764 |
10,147 |
17,330 |
Net carrying amount |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2024 |
1,043 |
1,924 |
170 |
3,136 |
903 |
455 |
927 |
3,429 |
51,181 |
10,290 |
67,185 |
70,323 |
|
2023 |
2024 |
|---|---|---|
Cost of goods and services sold |
–771 |
–761 |
Selling expenses |
–1,284 |
–1,291 |
Administrative expenses |
–205 |
–187 |
Research & development |
–267 |
–255 |
Total |
–2,527 |
–2,493 |
Goodwill
|
Carrying amount |
|
|---|---|---|
|
2023 |
2024 |
Sandvik Manufacturing and Machining Solutions |
|
|
Walter Group |
4,319 |
4,989 |
Seco Tools |
621 |
646 |
Sandvik Coromant |
4,016 |
4,389 |
Dormer Pramet |
275 |
292 |
SMS China Division |
– |
1,250 |
Business area level |
15,166 |
16,461 |
Total |
24,397 |
28,028 |
Sandvik Mining and Rock Solutions |
|
|
Business area level |
16,095 |
16,811 |
Total |
16,095 |
16,811 |
Sandvik Rock Processing Solutions |
|
|
Business area level |
6,127 |
6,300 |
Total |
6,127 |
6,300 |
Other Operations |
39 |
42 |
Group total |
46,657 |
51,181 |
Impairment tests of goodwill
As previously stated, the carrying amount of goodwill in the consolidated balance sheet is SEK 51,181 million (46,657), essentially related to a number of major business combinations.
In 2024, there were no changes to the business areas that have caused the cash generating units (CGUs) that existed during 2023 to change. However, the new SMS China Division, that was set-up following the acquisition of Suzhou Ahno, constitutes a new CGU within Sandvik Manufacturing and Machining Solutions. 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, SMS China Division 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 forecasts consider potential significant climate related risks (as well as other types of risks recognized in the Sandvik Key Risk map) and the group’s ongoing and future mitigating activities.
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 all CGUs in recent years. The future revenues in 2025 are somewhat higher due to the acquisitions in 2024, but in 2026 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 10.0 percent and 12.4 percent; Sandvik Mining and Rock Solutions 11.3 percent (11.2), Sandvik Rock Processing Solutions 12.4 percent (11.0), Walter Group 10.0 percent (11.0), Seco Tools 10.5 percent (10.0), Sandvik Coromant 10.5 percent (9.7), Dormer Pramet 11.1 percent (10.5), SMS China Division 10.0 and Sandvik Manufacturing and Machining Solutions 10.5 percent (10.0). The specific risks of the CGUs have been adjusted for future cash flow forecasts.
The impairment testing of goodwill performed during the fourth quarter 2024 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
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
- Customer Relationships 3–12 years
- 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
The Sandvik 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.