14 Intangible Assets

Goodwill and Trademark Rights

The carrying amount of goodwill came to € 1,648.8 million as of June 30, 2022. This means that goodwill has dropped by € 1,117.7 million compared with December 31, 2021. The change is due, first of all, to the impairment of € 1,082.5 million identified in the first quarter of 2022 as part of the (ad hoc) impairment test performed. Within the meaning of IAS 36, the triggering event related to further increases in the values of the real estate portfolio during the 2022 fiscal year in combination with the increased cost of capital of the Rental segment’s business areas in Germany.

Second, the change is due to the impairment identified in the second quarter of 2022 as part of the (ad hoc) impairment test performed. The increased cost of capital in the nursing and assisted living business area was classified as a triggering event within the meaning of IAS 36. The impairment test conducted as of June 30, 2022, resulted in the goodwill for the nursing and assisted living business area of € 35.2 million being written off in full.

In addition, trademark rights in the nursing and assisted living business area classified as having an indefinite useful life in the amount of € 86.0 million were also written off in full. This led to an impairment of € 121.2 million in the second quarter of 2022 for goodwill and trademark rights.

At the beginning of the fiscal year, the remaining new goodwill arising from the acquisition of Deutsche Wohnen in the amount of € 2,349.8 million was provisionally allocated to the relevant CGUs at Vonovia. The allocation of goodwill to the business areas of the Rental segment, the Value-add segment and the nursing and assisted living sector was performed based on the two indicators that reflect the synergy effects expected to be generated as a result of the business combination: “direct planned synergies” and “fair values.”

In accordance with IAS 36.19, first the value in use was calculated based on the Management Board-approved detailed plan with a planning period of five years. This was derived from the five-year plan at Group level approved by the Management Board and the Supervisory Board. The assumptions used to calculate the value in use match the assumptions used for the purposes of the impairment test at the end of 2021. With regard to the regional business areas of the Rental segment, the main drivers behind the results of the five-year plan are the increase in gross rental income and the planned vacancy rate.

The growth rate for the cash-generating units of the Rental segment and the nursing and assisted living business area was calculated regionally on the basis of Rental in-place rents and limited to 1% for the Rental segment as a whole. The growth rate for the nursing and assisted living business area was also restricted to 1%. The main parameters for calculating the value in use are the sustainable rate of increase, the average total cost of capital (WACC) and the expected cash flows.

The identified need for impairment for the entire fiscal year of € 1,203.7 million relates to the North, West and Central business areas, as well as the nursing and assisted living sector, with the goodwill and trademark rights allocated in each case being completely impaired. With the impairment loss recognized as of March 31 and June 30, 2022, there is no remaining goodwill or trademark rights in the business areas of the Rental segment or in the nursing and assisted living sector.

The impairment loss was recognized in the consolidated income statement under depreciation and amortization.

The value in use for the North business area amounts to € 8.2 billion, with a value of € 10.4 billion for the West business area, € 0.3 billion for the Central business area and € 1.3 billion for the nursing and assisted living business area.

A increase in the cost of capital would result in the following need for impairment: