Hexagon Annual Report 2019

OK 1 000) GOODWILL PATENTS AND LICENCES TECHNOLOGY AND DEVELOPMENT CUSTOMER RELATION- SHIPS 2018 TOTAL COST PRICE Opening balance 01.01.2018 401 433 16 364 107 946 128 911 654 653 Additions from purchase of companies 31 661 0 18 864 0 50 526 Additions 0 3 641 14 998 0 18 639 Disposals 0 0 0 0 0 Translation differences 4 479 30 0 1 212 5 721 Cost of acquisition 31.12.2018 437 574 20 034 141 808 130 122 729 539 ACCUMULATED DEPRECIATION AND IMPAIRMENT Opening balance 01.01.2018 0 12 963 55 241 35 111 103 315 Depreciation for the year 0 1 898 9 522 12 977 24 397 Impairment 256 0 0 0 256 Disposals 0 0 0 0 0 Translation differences 18 39 0 654 710 Accumulated depreciation and impairment 31.12.2018 274 14 900 64 762 48 742 128 678 Net carrying amount 31.12.2018 437 300 5 134 77 046 81 380 600 861 Amortization rate None 6-34 % 5-20 % 11-14 % Useful life Indefinite 3-17 years 5-20 years 7-9 years Depreciation method None Straight-line Straight-line Straight-line Addition of MNOK 50.5 relates to the acquisition of Digital Wave Corporation (see note 5). HEXAGON COMPOSITES ASA HAS THE FOLLOWING PURCHASED AND OWN-DEVELOPED INTANGIBLE ASSETS Additions for this year and the previous year primarily relate to technological developments in the Hexagon Mobile Pipeline and Hexagon Purus segments. Additions from purchase of companies in 2019 relate to the acquisition of Agility Fuel Solutions (see note 5). No impairment is made in 2019. Research & development costs totaling MNOK 89,0 (MNOK 48.2) were expensed in 2019. The Group has received government grants of MNOK 8.4 (MNOK 19.2) in 2019. MNOK 8.4 (MNOK 18.8) has been offset against research and development costs while MNOK 0.0 (MNOK 0.4) is presented as income. The Group has recognized goodwill as a result of four acquisitions of business enterprises. Each goodwill item is linked to a cash generating unit (CGU). When the acquired business enterprise is maintained as an independent business enterprise it is, as a starting point, the CGU. Entities that have considerable synergies and for which the type of activity is the same, are considered to be a unified CGU. This applies when acquired business enterprises are integrated with an existing Hexagon Composites company or the acquired business enterprise is, in operative terms, closely linked together with existing Hexagon Composites businesses. In these instances, it is the linking enterprise that is the level of the CGU where goodwill is measured and followed up. In the Group, two CGU’s have been identified which capitalized goodwill has been linked to. Goodwill is not depreciated but is subject to impairment testing in the fourth quarter each year. If there are particular indications of possible impairment, the impairment test is carried out on a quarterly basis. The impairment test is carried out by the calculated recoverable amount being compared with invested capital for the unit in question. When the recoverable amount exceeds invested capital, capitalized goodwill is maintained. When the recoverable amount is lower than invested capital, capitalized goodwill is written down to its recoverable amount. Invested capital consists of the units’ total assets less interest-free current liabilities and interest-free non-current liabilities. The recoverable amount is based on expected future cash flows for the relevant unit based on the management’s approved budget and strategy figures for the next four years. These are estimated based on current sales and margins and the expected market development. For subsequent periods it is assumed that there will be an increase in the cash flows equivalent to expected general growth within the various business areas. IMPAIRMENT TESTING The expected future investment requirements for the units are reflected in the calculations. These are in accordance with the management’s approved budget and strategy. For the period beyond the next four years, it is assumed that the re- investment requirement will be equivalent to expected depreciation. Changes in working capital have been assessed and adjusted in accordance with expected developments. 36 122 2019 AT A GLANCE FROM THE BOARD ROOM FINANCIAL STATEMENTS