18. Goodwill and other intangible assets

The acquisition costs as well as accumulated amortization and impairment of intangible assets consist of the following:

The carrying amounts for intangible assets as of December 31, 2024, and 2023, were as follows:

As at December 31, 2024, the “Patents and technology” item consisted of patents in the amount of EUR 726 thousand (Dec 31, 2023: EUR 2,169 thousand) and technology in the amount of EUR 7,318 thousand (Dec 31, 2023: EUR 13,067 thousand). Unpatented technologies contain specific process know-how in the production process identified in the course of company acquisitions.

Internally generated intangible assets include development costs for internally generated technologies in the amount of EUR 7,474 thousand (Dec 31, 2023: EUR 5,401 thousand) and for internally developed software in the amount of EUR 345 thousand (Dec 31, 2023: EUR 470 thousand).

The item ‘Intangible assets, other’ consists mainly of prepayments.

In addition to additions and disposals and scheduled amortization, the changes in intangible assets also resulted from positive exchange rate effects, in particular from the US dollar region.

The estimated useful lives for other intangible assets are as follows:

•Patents: 5 to 10 years

•Customer lists: 4 to 20 years

•Technology: 10 to 20 years

•Licenses, rights: 3 to 5 years

•Trademarks: indefinite or 20 years

•Software: 3 to 5 years

The change in goodwill is summarized as follows:

In addition to goodwill, there are intangible assets with indefinite useful lives in the area of brands in the amount of EUR 30,706 thousand (2023: EUR 28,869 thousand) which resulted from the acquisition of NDS in 2014. From a market perspective, NORMA Group assumed an indefinite useful life for these acquired trademarks, which mainly include the corporate brand NDS^®, because these brands have been established in the market for a number of years and there is no foreseeable end to their useful life, therefore useful lives are indefinite. Trademarks with indefinite useful lives are fully allocated to the cash-generating unit (CGU) Americas.

Brands with indefinite useful lives are subject to an annual impairment test in accordance with IAS 36 on the basis of the recoverable amount in accordance with the procedure described in NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – IMPAIRMENT OF NON-FINANCIAL ASSETS. As part of the application of the license price analogy, the fair value of the brands is determined using a notional license payment based on the respective brand-relevant sales derived from the planning. The assumption of future sales is based on the expectations of local management. For the NDS brand, a discount rate of 8.9% (2023: 7.0%) and a growth rate of 1.0% (2023: 1.0%) were taken into account in the detailed planning period of five years. With regard to the impairment test of the NDS brand, there were no indications of impairment.

On December 31, 2024, and 2023, the intangible assets were unsecured.

Impairment tests for goodwill

Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to geographical areas. A summary of the goodwill allocation is presented below:

The change in goodwill is the result of currency effects and the acquisition of Teco.

The recoverable amount of a CGU for which goodwill is recognized is determined based on fair value less costs to dispose, which is calculated by discounting projected cash flows. In view of the input factors used for this valuation technique, the fair values determined are to be classified as level 3 fair values NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – DETERMINATION OF FAIR VALUES. The determination of future cash flows is based on internal corporate planning, which is prepared with the “bottom-up” method using certain uniform Group-wide assumptions and covers a period of five years. The underlying parameters, such as sales growth and margins, are determined on the basis of expertise gained in the past, current economic results, and forecasts by external industry experts such as the VDMA industry association, the German Association of the Automotive Industry (VDA), and the LMC Automotive (LMCA). The average growth rates of revenues in the detailed planning period for CGU EMEA is 5.7% (2023: 6.7%), for the Americas CGU 10.2% (2023: 8.1%) and for the Asia-Pacific CGU 10.3% (2023: 13.6%). In terms of the average EBIT margin in the same planning period, this results in a ratio of 9.6% (2023: 10.3%) for the EMEA CGU, 10.4% (2023: 11.4%) for the Americas CGU and 9.6% (2023: 11.6%) for the Asia-Pacific CGU.

For the extrapolation of cash flows beyond this five-year period, the estimated growth rates given below are used. NORMA Group believes that these growth rates do not exceed the long-term average growth rate for the geographical area of the respective CGU.

The discount rates used are after-tax rates and reflect the specific risk of each CGU. The corresponding pre-tax interest rates for the EMEA CGU are 12.9% (2023: 13.6%) for the CGU Americas 11.7% (2023: 11.6%) and for the CGU Asia-Pacific 13.3% (2023: 14.0%).

The fair value less costs to sell is mainly determined by the terminal value (present value of the perpetual annuity), which is particularly sensitive to changes in the assumptions for the long-term growth rate and the discount rate. Both assumptions are determined individually for each cash-generating unit. The discount rates are based on the concept of Weighted Average Cost of Capital (WACC).

The further key assumptions used for fair value less costs to sell calculations are as follows:

The aforementioned assumptions relate to the goodwill impairment test performed as part of the annual impairment test regularly carried out as of September 30.

A sensitivity analysis for each CGU considers possible changes in key assumptions. The sensitivity analysis was performed in isolation for all significant factors, i.e., a change in the fair value of a cash-generating unit is only caused by a decrease or increase in the respective factor. No impairment was required for any of the identified sensitivities.

An impairment test was carried out for the CGU Kimplas Piping Systems Ltd. (legal company) due to the continued negative business development.

As part of this review, the recoverable amount was determined on the basis of the value in use. The value in use is equivalent to the present value of the future cash flows (discounted cashflow) generated from the continuing use of the asset.

The impairments were recorded in the statement of comprehensive income under the item “Depreciation and amortisation”.

The recoverable amount of the CGU as at December 31, 2024, was EUR 7,377 thousand, based on an after-tax discount rate of 11.2%.