The amortization expense for Epsilon intangible assets stood at euro 68 million in the first half of 2020. Since the acquisition of Epsilon took place on July 1, 2019, there was no amortization expense in the first half of 2019.
Other acquisition-related intangible assets with a finite useful life were also amortized for euro 26 million.
In the context of the pandemic, impairment indicators have been identified leading the Group to conduct impairment tests on goodwill.
The 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. Net revenue and operating margin forecasts for 2020 have been adjusted to take into account short-term reductions in activity.
Given the uncertainty and lack of visibility, these tests took the form of multiple scenarios based on different rates of recovery. The operational assumptions envisaged are trends corroborated by macroeconomic scenarios. They were carried out in order to have a sufficiently large range of values to reach a conclusion on the risk of impairment.
The key assumptions used are described below for each of the possible scenarios:
These tests did not lead to any impairment loss being recognized as of June 30, 2020.
The other assumptions used in these tests are presented in the table below:
|
|
June 30, 2020 | ||
|---|---|---|---|
| (in millions of euros) | Carrying amount of goodwill | After-tax discount rate | Terminal growth rate |
| North America | North America June 30, 2020 7,943 |
9.5%-10% | 1%-2% |
| Europe | Europe June 30, 2020 1,590 |
9%-11% | 1%-2% |
| Asia-Pacific | Asia-Pacific June 30, 2020 1,084 |
11.5% | 3% |
| Middle East & Africa | Middle East & Africa June 30, 2020 319 |
11.5% | 3% |
| Latin America | Latin America June 30, 2020 244 |
12.5%-13.5% | 0%-3% |
| Other goodwill | Other goodwill June 30, 2020 346 |
9%-10% | 0%-2% |
| Total goodwill | Total goodwill June 30, 2020 11,526 |
|
|
The Group has continued to implement the program to optimize premises launched in early 2018 which aims to group agencies at one or more sites in the main countries.
This program required vacated leased spaces, to best use the existing space at other sites, and consequently right-of-use assets concerning the empty spaces were subject to total or partial impairment loss, and likewise concerning the fixtures in these spaces.
Impairment losses in the first half of 2020 reached euro 231 million, of which euro 128 million for right-of-use assets and euro 42 million for fixtures. Ancillary costs such as lease expenses and any taxes on vacant properties in the amount of euro 61 million are included in vacant property provisions (see Note 14).
