Impairment losses on intangible assets and intangible assets arising from acquisitions
Following the acquisition of Epsilon, a review of intangible assets relating to data management showed indications of impairment loss, in particular the duplication of certain applications, resulting in the recognition of a euro 22 million expense.
Moreover, client relationships acquired were tested for impairment. All valuations required for these tests were conducted by an independent expert. At December 31, 2019, the after-tax discount rates used in the valuations ranged from 9.5% to 11%.
They are determined on the basis of the specific characteristics belonging to each asset undergoing impairment testing. At December 31, 2019, a euro 20 million impairment loss was recognized following these tests for Digitas client relationships.
At December 31, 2018, the after-tax discount rates used in the valuations ranged from 8.5% to 14.5%. No impairment losses were recognized in 2018.
Impairment of equity investments
The impairment loss recognized in 2019 relates to long-term equity investments in Matomy Media Group for euro 12 million and Jana Mobile for euro 13 million. The main assets of these two entities are currently being sold or liquidated (see Note 13).
Impairment losses on assets held for sale
The value of the assets and liabilities held for sale was written down to their realizable value less disposal costs. This led the Group to recognize the following impairment loss at December 31, 2019:
Goodwill impairment
Impairment tests were performed on the cash-generating units, which consist of agencies or combinations of agencies. The valuations required for the impairment tests on the most significant goodwill were conducted by an independent expert. The goodwill
impairment tests were carried out on the basis of the value in use of the cash-generating units, which was determined based on five-year financial forecasts (2020-2024). Forecasts for 2020 are taken directly from the annual budget approved by management.
These tests did not lead to any impairment being recognized in 2019. The after-tax discount rates used range between 9% (13% before tax) and 14% (18.5% before tax). The terminal growth rate used in the forecasts ranges from 0.5% to 3.5%.
The main assumptions used in these tests are presented in the table below:
|
|
2019 | 2018 | ||||
|---|---|---|---|---|---|---|
| (in millions of euros) | Carrying amount of goodwill | After-tax discount rate | Terminal growth rate | Carrying amount of goodwill | After-tax discount rate | Terminal growth rate |
|
Publicis Communications |
2019 3,562 |
2018 9.5% |
0.5% |
3,428 |
9.5% |
1.0% |
|
Epsilon |
2019 2,381 |
2018 10% |
3% |
- |
- |
- |
|
Publicis Media |
2019 2,508 |
2018 10% |
1.5% |
2,244 |
9.0% |
1.5% |
|
Publicis Sapient |
2019 2,073 |
2018 11% |
3% |
2,043 |
11.0% |
3.0%(1) |
|
Publicis Health |
2019 581 |
2018 10.5% |
2.5% |
541 |
10.5% |
2% |
|
Former Publicis One |
2019 518 |
2018 9.5% to 14% |
3% to 3.5% |
490 |
10% to 14.5% |
3% to 4% |
|
Other goodwill |
2019 6 |
2018 9% |
2% |
5 |
10% |
2% |
|
Total goodwill after impairment loss |
2019 11,629 |
2018
|
|
8,751 |
|
|
(1) As historical performance and market research forecasts have shown, growth in advertising expenditure in the United States’ digital sector is particularly strong (annual growth is generally between 10% and 20% depending on the year). Consequently, it was assumed that the market will not yet be fully mature at the end of the forecast period.
