14. Intangible assets

The largest portion of the Group’s intangible assets is goodwill. Around half of the goodwill arose as a result of the acquisition of the SIG Group by Onex in 2015. The remaining half of the goodwill mainly arose as a result of the acquisitions of the bag-in-box and spouted pouch businesses (Scholle IPN) on June 1, 2022, Evergreen’s chilled carton business in Asia Pacific (“Evergreen Asia”) on August 2, 2022 and the remaining shares of the joint ventures in the Middle East in 2021. The other intangible assets mainly consist of trademarks, customer relationships and technology-related assets. The SIG trademarks have indefinite useful lives.

Composition of intangible assets

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Composition of Intangible assets
(In € million)	Goodwill	Trademarks	Customer relation-ships	Technology and other assets	Total
Cost	3,127.3	378.9	1,018.3	259.1	4,783.6
Accumulated amortization and impairment losses	–	(4.2)	(616.4)	(108.6)	(729.2)
Carrying amount as of December 31, 2023	3,127.3	374.7	401.9	150.5	4,054.4
Cost	3,185.3	373.8	1,025.6	263.1	4,847.8
Accumulated amortization and impairment losses	–	(7.9)	(715.9)	(161.9)	(885.7)
Carrying amount as of December 31, 2024	3,185.3	365.9	309.7	101.2	3,962.1
Carrying amount as of January 1, 2023	3,186.2	356.3	508.9	194.8	4,246.2
Additions	–	–	–	7.7	7.7
Additions through business combination	0.3	–	–	–	0.3
Amortization	–	(2.9)	(97.1)	(54.5)	(154.5)
Effect of movements in exchange rates	(59.2)	21.3	(9.9)	2.5	(45.3)
Carrying amount as of December 31, 2023	3,127.3	374.7	401.9	150.5	4,054.4
Carrying amount as of January 1, 2024	3,127.3	374.7	401.9	150.5	4,054.4
Additions	–	–	–	1.4	1.4
Amortization	–	(3.4)	(96.2)	(52.3)	(151.9)
Effect of movements in exchange rates	58.0	(5.4)	4.0	1.6	58.2
Carrying amount as of December 31, 2024	3,185.3	365.9	309.7	101.2	3,962.1

Research and development

Research and development costs (excluding depreciation and amortization expense) recognized as a component of general and administrative expenses amount to €67.5 million for the year ended December 31, 2024 (€66.9 million for the year ended December 31, 2023).

In the year ended December 31, 2024, the Group has capitalized development costs of €1.1 million (€5.4 million in the year ended December 31, 2023). The capitalized costs (included in “Technology and other assets” in the table above) relate to minor projects.

Amortization of intangible assets

Amortization of intangible assets is recognized in the following components in the statement of profit or loss and other comprehensive income.

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Amortization of intangible assets
(In € million)	Year ended Dec. 31, 2024	Year ended Dec. 31, 2023
Cost of sales	96.9	99.6
Selling, marketing and distribution expenses	3.7	3.2
General and administrative expenses	51.3	51.7
Total amortization	151.9	154.5

Annual impairment tests of goodwill and trademarks with indefinite useful lives

Goodwill with a carrying amount of 3,185.3 million as of December 31, 2024 (€3,127.3 million as of December 31, 2023) and the SIG trademarks with indefinite useful lives with a carrying amount of €357.1 million as of December 31, 2024 (€362.9 million as of December 31, 2023) are tested for impairment on an annual basis and whenever there is an impairment indicator. The annual impairment tests are performed in the fourth quarter each year.

Goodwill

The Group does not monitor goodwill at a lower level than Group level for internal management purposes but, for impairment testing purposes, goodwill must be allocated to a CGU, or group of CGUs, that is not larger than an operating segment before aggregation. The Group has allocated the goodwill for impairment testing purposes to its four operating (and reportable) segments.

The table below shows the allocation of goodwill to the Group’s four segments as well as the key assumptions used in the impairment test.

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Year ended December 31, 2024

Year ended December 31, 2023

(In € million or %)

Carrying
amount

Growth
rate

Pre-tax
discount rate

Carrying
amount

Growth
rate

Pre-tax
discount rate

Europe

999.0

2.50%

10.5%

999.0

2.75%

8.4%

IMEA¹

582.6

2.50%

11.1%

573.2

2.75%

11.5%

APAC¹

896.9

2.50%

8.7%

865.4

2.75%

8.2%

Americas

706.8

2.50%

10.5%

689.7

2.75%

11.4%

Total goodwill

3,185.3

3,127.3

1	The Indian operations were included in APAC until November 1, 2023, when they were moved to MEA. The former segment MEA thereby became IMEA. See note 7.

For the impairment test of goodwill, the recoverable amount has been estimated with reference to value in use. In assessing the value in use, the estimated future cash flows (in Euros) have been discounted to their present values using a pre-tax discount rate that reflects current market assessments of the time value of money as well as the risks specific to each segment. The weighted average cost of capital (“WACC”) is used to determine the discount rate. Cash flows for the first five years are based on financial plans approved by management. Cash flows after the five-year internal planning period are extrapolated using terminal growth rates that are aligned with the estimated long-term inflation. The terminal growth rates used by the Group for impairment testing purposes do not exceed the estimated long-term growth rates in the packaging industry.

No impairment of goodwill was identified in either of the periods. Management considers it unlikely that any realistic change in the assumptions used, including changes in the assessed future cash flows, would result in an impairment loss. The estimated recoverable amounts of the goodwill allocated to the segments significantly exceed the respective carrying amounts in both periods. Management does not believe that the current global economic uncertainty in general will have any significant long-term negative impacts on the Group’s estimated future cash flows (see note 5.4). However, there is no assurance that the Group’s experience to date, which has been reflected in the assessment of future cash flows, will be representative of future periods.

Trademarks with indefinite useful lives

The value of the SIG trademarks with indefinite useful lives is associated with the Group as a whole. Trademarks are tested for impairment at Group level as all SIG entities benefit from the trademarks. The entities are charged a royalty fee for the use of the SIG trademarks.

For the impairment test, the recoverable amount has been estimated with reference to value in use. The assessed royalty fees have been discounted to their present value using a pre-tax discount rate at Group level of 9.9% (9.6% in the 2023 annual impairment test) and a terminal growth rate at Group level of 2.5% (2.75% in the 2023 annual impairment test). The royalty fees for the first five years are based on financial plans approved by management. The same methodology as for the goodwill impairment test is used to extrapolate cash flows after the five-year internal planning period and to determine the discount rate.

No impairment of the SIG trademarks with indefinite useful lives was identified in either of the periods. Management considers it unlikely that any realistic change in the assumptions used would result in an impairment loss.

Accounting policy

Goodwill arising on business combinations is measured at cost less accumulated impairment losses. The SIG trademarks are assessed to have indefinite useful lives considering the long history of the SIG brand and its expected future continuous use. They are measured at cost less accumulated impairment losses. Other intangible assets, including customer relationships, Scholle trademarks and technology assets, have finite useful lives and are measured at cost less accumulated amortization and accumulated impairment losses. Gains and losses on disposals of intangible assets are recognized in profit or loss as part of other income or expenses.

Development expenditure is capitalized only if the expenditure can be measured reliably, the product or process is technologically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete the development and to use or sell the asset. If the capitalization criteria are not met, development expenditure is recognized in profit or loss as incurred. Expenditure on research activities is recognized in profit or loss as incurred.

Intangible assets with finite useful lives are amortized on a straight-line basis over their estimated useful lives, with amortization generally recognized in profit or loss. The estimated useful lives of amortizable intangible assets for the current and comparative periods are as follows:

Customer relationships 10 to 15 years
Scholle trademarks 7 years
Technology assets (including patented and non-patented technology and know-how) 6 to 10 years
Other intangible assets (including software) 3 to 6 years

Capitalized development costs are amortized over the period that is assessed to reflect the expected useful life of the particular innovation (up to 15 years).

After the acquisitions of Scholle IPN and Evergreen Asia in 2022, the Company launched a new, refreshed branding – SIG for better – to showcase the expanded Group as one company, one family and one brand. In connection with this re-branding launch in 2023, the useful life of the acquired Scholle trademarks were reassessed and changed from the originally assessed seven years to a remaining useful life of four years at the date of change. The change has been accounted for on a prospective basis as of July 1, 2023. The change does not have a significant impact on the Group’s amortization charge over the remaining useful life of the Scholle trademarks.

Impairment of goodwill and other intangible assets

Intangible assets with finite useful lives are reviewed regularly and at least annually to identify whether there is an impairment indicator. Goodwill and the SIG trademarks with indefinite useful lives are tested for impairment on an annual basis and whenever there is an impairment indicator. See note 5.5.3 for further details.

Significant judgments and estimates

Significant judgment is involved in the annual impairment testing of goodwill and the SIG trademarks with indefinite useful lives. The judgments and assumptions used in estimating the recoverable amount are included above under “Annual impairment tests of goodwill and trademarks with indefinite useful lives”, where the outcome of the annual impairment tests is also described.