Intangible assets arising on business combinations – marketing related – customer related – technology based Operating intangible assets – development costs Property, plant and equipment Investments – equity accounted investments – other investments Loans Inventories Trade and other receivables Trade and other payables Government refundable advances Post-employment obligations Derivative nancial instruments Provisions Deferred tax Provisional goodwill Satis ed by: Fair value of consideration – cash and cash equivalents
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From the date of the acquisition to the balance sheet date, Fokker contributed £102 million to statutory sales and a £5 million loss within trading pro t excluding acquisition related charges of £13 million. If the acquisition had been completed on 1 January 2015 the Group’s statutory sales and trading pro t for the year ended 31 December 2015 are estimated at £7,704 million and £650 million respectively. Acquisition related charges of £13 million have been recorded in the income statement within trading pro t (see note 2 for details). Goodwill (which is not tax deductible) is attributable to the value of the assembled workforce, expected future synergies from combination with the Group’s existing Aerospace business and likelihood of future business awards.
Signi cant judgements, assumptions and estimates in the acquisition accounting for Fokker Valuation of intangible assets — methodology
A fair value exercise was carried out in conjunction with third party experts and considered the existence of the intangible assets relevant and attributable to the business. The intangible assets inherent in Fokker’s customer relationships/contracts were valued using an excess earnings method. This methodology places a value on the asset as a function of (a) management’s estimate of the expected cash flows arising from the customer contracts; (b) discount rates reflective of the risks inherent in the cash flows; and (c) a contributory charge attributable to assets needed to generate the operating cash flows. An a er tax discount rate of 10% to 12% was applied to the forecast cash flows. The tradename of Fokker was deemed to have measurable value as it is well recognised in its industry. It has been valued using a relief from royalty methodology based on projected cash flows attributable to the tradename and an assumed royalty rate of 1% that would be charged if the name were subject to licence within a comparable trade situation and an appropriate discount rate (12%) reflecting inherent risk in the projected cash flows. A total fair value of £51 million has been recognised for tradenames.
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