Cellcom Israel Ltd. | CIK:0001385145 |

Note 12 - Intangible Assets and Others, net

 

		Licenses and Frequencies				Information systems				Software				Customer acquisition costs				Goodwill				Customer relationships and other				Total
		NIS millions				NIS millions				NIS millions				NIS millions				NIS millions				NIS millions				NIS millions
Cost
Balance at January 1, 2016			552				296				62				-				830				324				2,064
Additions			-				73				8				-				-				-				81
Disposals			-				(65	)			(17	)			-				-				(16	)			(98	)
Balance at December 31, 2016			552				304				53				-				830				308				2,047
Additions			-				72				4				120				-				6				202
Disposals			-				(48	)			(12	)			-				-				-				(60	)
Discontinuance of consolidation (see Note 7B)			-				(3	)			-				-				(21	)			-				(24	)
Balance at December 31, 2017			552				325				45				120				809				314				2,165
Accumulated Amortization
Balance at January 1, 2016			351				116				34				-				-				309				810
Amortization for the year			31				71				13				-				-				13				128
Disposals			-				(65	)			(17	)			-				-				(16	)			(98	)
Balance at December 31, 2016			382				122				30				-				-				306				840
Amortization for the year			19				68				9				27				-				3				126
Disposals			-				(48	)			(12	)			-				-				-				(60	)
Discontinuance of consolidation (see Note 7B)			-				(1	)			-				-				-				-				(1	)
Balance at December 31, 2017			401				141				27				27				-				309				905
Carrying amounts
At January 1, 2016			201				180				28				-				830				15				1,254
At December 31, 2016			170				182				23				-				830				2				1,207
At December 31, 2017			151				184				18				93				809				5				1,260

In the ordinary course of business, the Group acquires Intangible assets on credit. The cost of acquisitions, which has not yet been paid at the reporting date, amounted to NIS 28 million (December 31, 2016 and 2015, NIS 32 million and NIS 33 million, respectively).

A.	Impairment testing for cash-generating unit containing goodwill

For the purpose of impairment testing, goodwill is allocated mainly to the Fixed-line segment, which represents the lowest level within the Group, at which goodwill is monitored for internal management purposes, which is not higher than the reported operating segments. See Note 6, regarding Operating Segments.

The recoverable amount of the Fixed-line segment was based on its value in use and was determined by discounting the expected future cash flows to be generated from the continuing use. The recoverable amount of the Fixed-line segment as of December 31, 2017, was determined to be higher than its carrying amount and thus, no impairment loss has been recognized.

 

B.	Key assumptions used in calculation of recoverable amount

Key assumptions used in the calculation of recoverable amounts are discount rate and terminal value growth rate. These assumptions are as follows:

 

(1)       Pre-tax discount rate and terminal value growth rate

 

 

·

The discount rate and the terminal value growth rate are denominated in real terms.

 

·

The Fixed-line segment has cash flows for 5 years, as included in its discounted cashflow model.

 

·

The long-term growth rate has been determined as 1.5% which represents, among others, the natural population growth rate.

 

·

The pre-tax discount rate is estimated and calculated using several assumptions, among others, Fixed-line segment's Cost of Equity, risk premium for normative debt leveraging of the Group and estimates of the normative leverage ratio for the industry.

(2)

Sensitivity to changes in assumptions

The estimated recoverable amount of the Fixed-line segment exceeds its carrying amount by approximately NIS 105 million (2016: approximately NIS 74 million). Management has identified two key assumptions for which there reasonably could be a possible change that could cause the carrying amount to exceed the recoverable amount. The table below shows the amount that these two assumptions are required to change individually in order for the estimated recoverable amount to be equal to the carrying amount:

 

		2016			2017
Pre-tax discount rate		10.8%			10.8%
Terminal value growth rate		1.0%			0.9%