Vilmorin & Cie - Annual report 2017-2018

5 ANNUAL REPORT Vilmorin & Cie 169 2017-2018 Note 14: Goodwill 1- Principles of evaluation and impairment of goodwill 1.1 - Evaluation of goodwill In compliance with the standard IFRS 3, the assessment of the fair value of the identifiable assets and liabilities acquired as a result of business combinations can be modified for a period of twelve months following the acquisition date. Otherwise, there is no goodwill pending allocation. 1.2 - Goodwill impairment test Vilmorin & Cie carried out impairment tests on its goodwill on June 30, 2018 for all the Cash Generating Units (CGUs) to which goodwill is allocated. As stated in Note 1 paragraph 11, these tests consist in comparing the net book value of the assets of the CGUs with their recoverable value as assessed using the method of provisional discounted cash flows (value in use). CGUs comprise groups of legal entities forming units with centralized management. Each operating segment thus comprises one or several CGUs running their business autonomously with regard to each other. For all the CGUs, with the exception of the Field Seeds CGU, the following hypotheses, considered to be key, have been used to calculate the discounted value of the provisional cash flow for the CGUs: Number of years of provisional data: 5 years. Growth rate: 2%, with the exception of the Garden Products CGU, for which the adopted growth rate has been reviewed at 1.1% in order to account for more moderate growth perspectives on the French market. Discount rate after taxes: different rates have been adopted for each CGU in accordance with market data; they vary from 4.8% to 5.8% depending on zones. With regard to the operating segment of Field Seeds, the fact that activities are managed centrally means that they are analyzed in a single CGU which encompasses all the processes of research, production and distribution run on the different continents. As of fiscal year 2016-2017, the impairment test for this CGU is conducted on the basis of provisional cash flows projected over a period of eight years instead of five years, in order to take account of longer economic cycles, in particular because of long-term investments such as the Syngenta license acquired in October 2015. This test projected over eight years was prepared by Corporate Finance, in conjunction with the Field Seeds division management, on the basis of a discount rate of 6.0% and a perpetual growth rate of 2%. It also takes account of the following: integration of the effects of the Syngenta license into the Business Unit Limagrain South America, neutralization of the research costs invoiced by the Business Unit AgReliant to the Business Unit Limagrain Europe, since the cash flows of the joint venture AgReliant are not included in the provisional cash flows of the CGU, as it is integrated using the equity method. These tests did not show up any impairment. The sensitivity analyses carried out show that the use of discount rates higher by one percentage point, or growth rates for the normative year lower by one percentage point, than those shown above, or half a point in the particular case of the Garden Products CGU, would not have led to any identified need for impairment, since the recoverable value of the CGUs remains in all cases higher than the net book value of their assets. 2- Evolution of net book values 2.1 - Gross values In millions of euros 07.01.16 396.7 Acquisitions and increases - Impact of minority redemption commitments - Exits - Allocation of goodwill - Variations in scope - Reclassifications -0.1 Currency translations -5.3 06.30.17 391.3 Acquisitions and increases - Impact of minority redemption commitments - Exits - Allocation of goodwill - Variations in scope - Reclassifications - Currency translations -9.1 06.30.18 382.2 5.1. Consolidated Financial Statements Financial INFORMATION