FINANCIAL AND ACCOUNTING INFORMATION there is no foreseeable limit to the period over which Goodwill they are expected to generate net cash inflows for Goodwi l l arising in a business combination the Group. They are not amortized and are tested represents a payment made in anticipation of for impairment annual ly or as soon as there is an future economic benefits arising from assets that indication that these assets may be impaired. are not capable of being identified individually and Software and other intangible assets accounted for separately, such as market shares, the value of workforce, the potential to develop existing This caption includes mainly the net book value business assets and expected synergies from the of software for €128.5 mil lion as of December 31, combination. In the wholesale distribution sector, 2017 (€129.5 mi l l ion as of December 31, 2016) these synergies notably include those expected and customer relationships for €47.9 mil lion as of in terms of purchasing, logistics, network and December 31, 2017 (€67.2 million as of December 31, administration. Goodwill is tested at least annually 2016). for impairment purposes. Customer relationships are recognized when the The table below sets forth the allocation of goodwill acquired entity establishes relationships with key and intangible assets with indefinite useful life by customers through contracts. Customer relationships cash generating unit. are measured using an excess profit method and are amortized over their useful lives based on historical attrition ranging from 5 to 15 years. AS OF DECEMBER 31, (in millions of euros) 2017 2016 GEOGRAPHIC INTANGIBLE INTANGIBLE CGU SEGMENT GOODWILL ASSETS TOTAL GOODWILL ASSETS TOTAL France Europe 1,047.7 169.4 1,217.1 1,047.7 169.4 1,217.1 5 United States North America 928.3 142.9 1,071.3 1,056.2 162.6 1,218.8 Canada North America 452.1 67.4 519.4 479.2 71.4 550.6 Switzerland Europe 256.2 36.0 292.2 279.1 39.2 318.3 United Kingdom Europe 195.0 57.7 252.6 202.0 59.8 261.8 Sweden Europe 188.0 19.1 207.1 193.8 19.7 213.5 Germany Europe 98.2 51.7 149.9 184.4 51.7 236.1 Norway Europe 158.0 12.6 170.6 171.1 13.6 184.7 Australia Asia-Pacific 118.7 25.3 144.0 124.8 26.6 151.4 Austria Europe 88.5 13.0 101.5 88.5 13.0 101.5 Belgium Europe 76.4 – 76.4 76.4 – 76.4 Other 307.8 232.4 540.2 397.0 235.4 632.4 Total 3,914.9 827.4 4,742.3 4,300.2 862.4 5,162.6 Impairment discounted on the basis of the weighted average The Group performs impairment tests of goodwill at cost of capital net of tax calculated for each country. the country level, which represents the lowest level Country-specific risk is incorporated by applying at which operations are monitored by management individual risk-free rates and equity risk premium. for the purpose of measuring return on investment. The weighted average cost of capital reflects the time value of money and the specific risks of the Value-in-use key assumptions assets, not already factored in the projected cash The recoverable amount of the cash-generating flow, by taking into account the capital structure and units was determined based on value in use. the financing terms and conditions of a standard The calculation of the value in use is based on a market participant. discounted cash flow model . The cash flows are The calculation of value in use is mostly sensitive to derived from the strategic plan prepared during the EBITA margin computed in the terminal value, the yearly budget process in November 2017 for the discount rate and the perpetual growth rate: the next 3 years and also include an extrapolation of two additional years and a normative terminal • EBITA Margin value. A perpetual growth rate has been used for the EBITA margin factored in the terminal value cash calculation of the terminal value. Cash flows were flow is set on a country by country basis based on REXEL 2017 – REGISTRATION DOCUMENT 235