425 / 488
Chapter
35 /
Business Combinations (IFRS 3)
413
Effective January 31, 2006, the adidas Group assumed control of Reebok International Ltd.
(USA), with all its direct and indirect shareholders. The purchase price for 100% of the shares of
Reebok International Ltd. (USA) was $3.6 billion (€3 .00 billion ), fully paid in ca sh.
The acquisition had the following effect on the Group' s assets and liabilities:
Reebok's Net Assets at the Acquisition Date
€
in millions
Recognised
value
Oil
acquisit ion
539
453
502
100
260
1,742
4
242
16
(506)
( 109)
(59)
(359)
(418)
(7)
(589)
(2)
(3)
1,806
1,165
2,971
539
2,432
(30)
(578)
55
(3)
(33)
1,674
4
44
1,133
Fair valu e
adiustments
198
16
(506)
(109)
(59)
(329)
(418)
(7)
( II )
(2)
(3)
673
Preacquisition
caro -ing amollnts
539
453
447
103
293
68
Cash and cash equivalents
Accounts receivable
Inventories
Other current assets
Property. plant. and equipment, net
Trademarks and other intangible assets, net
Long-term financial assets
Deferred tax assets
Other noncurrentassets
Borrowings
Accounts payable
Income taxes
Accrued liabilities and provisions
Other current liabilities
Pensions and similar obligations
Deferred tax liabilities
Other noncurrent liabilities
Minority interests
Net assets
Goodwill arising on acquisition
Purchase price settled in cash
Cash and cash equivalents acquired
Cash outflow on acquisition
Following valuation methods for the acquired assets have been applied.
• Inventories: The pro rata basis valuation is applied for estimating the fair value of acqu ired
inven tories . The realized margins were added to the book values of the acquired inventories.
Subsequently, cost to complete for selling, advertising, and genera l administration and a
reasonable pro rata allowa nce were deducted.
• Property, plant, and equipment: The comparison method was used for acquired land by
considering the prices pai d for comparab le properties . The direct cap italizatio n method was
applied for the valuation of all acquired buildings. The annual ren ts which ca n be realized
will be adj usted by dedu cting risk factors and applicable opera ting costs and are finally
discounted.
The acquired mach inery and equipment is valued with the depreciated
replacement cost method . The repl acement costs are determined by applying an index to the
asset's historical cost. The replacement costs are then adj usted for the loss in value caused by
depreciation.
• Trademarks and other intangible assets : The relief-from-roy alty method is applied for
trademarks and technologies. The fair value is determined by discou nting the roya lty savings
after tax and adding a tax amort ization benefi t, resulting from the amo rtization of the
acquired asset. For the valuation of licensing agreements, customer relationships, and order
backlogs, the mult iperiod-excess-earnings method was used . The respective future excess
cash flows are ident ified and adj usted in order to eliminate all elements not assoc iated with
these assets . Future cash flows are measu red on the basis of the expected sales by dedu cting
variable and sales-related imputed costs for the use of contributory assets. Sub sequently, the
outcome is discounted using an appropriate discount rate and adding a tax amortization
benefit.
• Long-term financial assets: The discounted cash flow method was used for the valuation of a
partic ipation. Future free cash flows were discounted back to the valuation a date using an
appropriate discount rate.
The excess of the acquisition cos t paid over the net of the amounts of the fa ir values ass igned to
all assets acquired and liabilitie s ass umed, taking into con sideration the respective deferred taxe s, is
referred to as goodwill. Any acquired asset that does not meet the identification and recognition
criteria for an asset is included in the amount recognized as goodwill.