The valuations required for the impairment tests on the most significant goodwill were conducted by an independent expert. Goodwill impairment tests were performed either:
The projections for the years 2021 to 2025 predict a gradual return to a pre-pandemic situation which remains differentiated according to the geographic regions. The compound annual growth rates applied over the business plan period were corroborated with industry market studies on advertising spend by country or geographic region.
The tests carried out at December 31, 2020 confirm those carried out at June 30, 2020. These were carried out according to five different scenarios in order to obtain sufficiently broad estimation ranges to ascertain the risk of impairment. The tests carried out at year-end made it possible to specify the operational assumptions for each geographic region.
The method used in the calculation of discount rates and terminal growth rates is unchanged. The after-tax discount rates used range between 8.5% (10.9% before tax) and 14% (19.2% before tax). The terminal growth rate used in the forecasts ranged from 1.5% to 3.3%.
Impairment tests resulted in the recognition of an impairment loss of euro 15 million, of which euro 4 million in the Latin America region and euro 11 million on other goodwill relating to events activities and in particular the organization of forums. The sensitivity tests carried out show that there is no additional impairment charge to be recognized in the Groupe’s cash-generating units.
The main assumptions used in these tests are presented in the table below:
December 31, 2020 | |||
|---|---|---|---|
(in millions of euros) | Carrying amount of goodwill | After-tax discount rate | Terminal growth rate |
| North America | North America December 31, 2020 7,442 | 8,5% | 2% |
| Europe | Europe December 31, 2020 1,559 | 9 % -12% | 1,5% -2,5% |
| Asia-Pacific | Asia-Pacific December 31, 2020 1,040 | 9,3% | 2,5% |
| Africa & Middle East | Africa & Middle East December 31, 2020 306 | 10% | 2,6% |
| Latin America | Latin America December 31, 2020 191 | 13 %-14% | 2,8%-3,3% |
| Other goodwill | Other goodwill December 31, 2020 320 | 8,5 % -11% | 1,5% -2% |
| Total goodwill after impairment loss | Total goodwill after impairment loss December 31, 2020 10,858 | ||
The recoverable values determined as part of the impairment tests were subject to sensitivity tests to measure the impacts of an increase of 1% in the discount rates and a decrease of 0.5% in terminal growth rates. These impacts were as follows:
As part of the program to optimize premises, aiming to consolidate the agencies on one or more sites in the main countries, it was necessary to empty leased space in order to make better use of the existing space at other sites. 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.
Euro 226 million in impairment losses were recognized in 2020 (euro 170 million net of tax), including euro 126 million for right-of-use assets and euro 41 million for fixtures. Expenses such as facility management expenses and any taxes on vacant properties in the amount of euro 59 million are included in vacant property provisions; they also include early termination penalties.
Impairment losses in 2019 reached euro 127 million, of which euro 56 million for right-of-use assets and euro 15 million for fixtures. Expenses such as facility management expenses and any taxes on vacant properties in the amount of euro 56 million are included in vacant property provisions; they also include early termination penalties.
