8 Intangible assets

The amortization of intangible assets is included in Cost of sales, Marketing & Sales, Research & Development and General & Administrative expenses.

Over the past few years, DSM has acquired several entities in business combinations that have been accounted for by the acquisition method, resulting in recognition of mainly goodwill, customer- and marketing-related, and technology-based intangible assets. The amounts assigned to the acquired assets and liabilities are based on assumptions and estimates about their fair values. In making these estimates, management consults independent, qualified appraisers where appropriate.

Customer- and marketing-related intangibles were, among other things, obtained during the acquisition of Erber Group and Glycom in 2020, as well as CSK in 2019 and Fortitech in 2012. Technology-based intangibles were mainly obtained via the acquisition of Erber Group and Glycom in 2020 and F&F Amyris and First Choice Ingredients in 2021. Intangible assets are amortized on a straight-line basis and subject to impairment trigger testing. There are no intangible assets with an indefinite useful life (same as in 2021).

The carrying amount of the development projects includes €143 million (2021: €121 million) that relates mainly to strategic projects which are not being amortized yet. The recoverable amount of these projects was estimated based on the present value of the future cash flows expected to be derived from the projects (value-in-use).

Goodwill

DSM’s Cash Generating Unit (CGU) structure changed in 2022 because the Health, Nutrition & Bioscience (HNB) structure became effective as of 1 January 2022. More specifically, the CGUs DSM identified in 2022 were Animal Nutrition & Health (ANH), Health, Nutrition & Care (HNC), and Food & Beverage (F&B). Following the change in DSM’s CGU structure, the goodwill from continuing operations has been reallocated to the newly identified CGUs based on their relative value as derived from the recoverable amounts of these CGUs. The breakdown of the carrying amount of goodwill at year-end 2022 is as follows.

The annual impairment tests of goodwill are performed in the fourth quarter. The recoverable amount of the CGUs is based on a value-in-use calculation.

The cash flow projections are derived from DSM’s business plan as adopted by the Managing Board and updated periodically – for example when the strategy is updated. Mature businesses come to a terminal value after five years. The terminal value growth rate is determined with the assumption of limited inflationary growth. The key assumptions in the cash flow projections relate to the market growth for the CGUs and the related revenue projections, EBITDA developments, and the rates used for discounting cash flows.

For ANH and HNC, the growth assumptions are based on the growth of the global food and feed markets, for F&B on the growth assumptions of the global food and beverage market. A sensitivity test was performed on the impairment tests of the CGUs and showed that the conclusions of these tests would not have been different if a reasonable possible adverse change in key parameters had been assumed.

The market capitalization of DSM at 31 December 2022 amounted to €19,978 million (31 December 2021: €34,608 million) and was clearly above the carrying amount of net assets, thus providing an additional indication that goodwill was not impaired.