Intangible Assets

12 Months Ended

Dec. 31, 2019

15. Intangible Assets

Balances and changes in intangible assets are as follows:


	Weighted average useful life (years)		Balance on 12/31/2018			Adoption IFRS 16			Additions			Amortization			Transfer (i)			Write-offs and disposals			Effect of foreign currency exchange rate variation			Oxiteno Andina (*)			Balance on 12/31/2019

Cost:
Goodwill (a)		—		1,525,088			—			—			—			—			—			—			—			1,525,088
Software (b)		3		1,062,486			—			145,004			—			2,553			(784	)		1,551			(281	)		1,210,529
Technology (c)		5		32,617			—			—			—			—			—			—			—			32,617
Commercial property rights		10		64,032			(56,114	)		3,820			—			(1,401	)		(2,403	)		—			—			7,934
Distribution rights		6		142,989			—			1,505			—			(10,895	)		—			—			—			133,599
Brands (d)		—		120,571			—			—			—			—			—			1,933			—			122,504
Trademark rights (d)		35		114,792			—			—			—			—			—			—			—			114,792
Others (e)		10		43,281			—			1,668			—			(355	)		—			306			—			44,900

				3,105,856			(56,114	)		151,997			—			(10,098	)		(3,187	)		3,790			(281	)		3,191,963


Accumulated amortization:
Software				(537,438	)		—			—			(110,088	)		13			(611	)		(998	)		261			(648,861	)
Technology				(32,613	)		—			—			(3	)		—			—			—			—			(32,616	)
Commercial property rights				(23,931	)		16,186			—			(848	)		(669	)		2,878			—			—			(6,384	)
Distribution rights				(106,597	)		—			—			(6,511	)		4,176			—			—			—			(108,932	)
Trademark rights				(3,182	)		—			—			(2,937	)		—			—			—			—			(6,119	)
Others				(32,740	)		—			—			(105	)		136			—			(4	)		—			(32,713	)

				(736,501	)		16,186			—			(120,492	)		3,656			2,267			(1,002	)		261			(835,625	)

Provision for losses and impairment:
Goodwill (a)				—			—			(593,280	)		—			—			—			—			—			(593,280	)
Commercial property rights				—			—			(465	)		—			—			—			—			—			(465	)

				—			—			(593,745	)		—			—			—			—			—			(593,745	)

Net amount				2,369,355			(39,928	)		(441,748	)		(120,492	)		(6,442	)		(920	)		2,788			(20	)		1,762,593

(*) Refers to the asset write-offs of Oxiteno Andina (see Note 3.b.3).


	Weighted average useful life (years)		Balance on 12/31/2017			Additions		Amortization			Transfer (i)			Write-offs and disposals			Effect of foreign currency exchange rate variation			Balance acquisition TEAS (ii)			Balance on 12/31/2018
Cost:
Goodwill (a)		—		1,524,291			—		—			—			—			—			797			1,525,088
Software (b)		5		853,079			223,964		—			(1,258	)		(15,401	)		2,053			49			1,062,486
Technology (c)		5		32,617			—		—			—			—			—			—			32,617
Commercial property rights (d)		10		55,069			11,117		—			—			(2,154	)		—			—			64,032
Distribution rights		8		142,669			690		—			(350	)		—			(20	)		—			142,989
Brands (e)		—		113,543			—		—			—			—			7,028			—			120,571
Trademark rights (e)		39		114,792			—		—			—			—			—			—			114,792
Others (f)		10		40,514			1,822		—			—			—			945			—			43,281

				2,876,574			237,593		—			(1,608	)		(17,555	)		10,006			846			3,105,856

Accumulated amortization:
Software				(456,799	)		—		(79,845	)		59			28			(832	)		(49	)		(537,438	)
Technology				(32,541	)		—		(72	)		—			—			—			—			(32,613	)
Commercial property rights				(21,292	)		—		(4,679	)		—			2,040			—			—			(23,931	)
Distribution rights				(96,704	)		—		(10,018	)		125			—			—			—			(106,597	)
Trademark rights				—			—		(3,182	)		—			—			—			—			(3,182	)
Others				(31,196	)		—		(1,538	)		—			—			(6	)		—			(32,740	)

				(638,532	)		—		(99,334	)		184			2,068			(838	)		(49	)		(736,501	)

Net amount				2,238,042			237,593		(99,334	)		(1,424	)		(15,487	)		9,168			797			2,369,355

(i) Refers to amounts transferred to PP&E and right to use assets as from 2019.

(ii) See Note 3.c.


	Weighted average useful life (years)		Balance on 1/1/2017			Additions		Amortization			Transfer			Write- offs and disposals			Effect of foreign currency exchange rate variation			Fair value CBLSA			Balance on 12/31/2017
Cost:
Goodwill (a)		—		1,454,484			—		—			—			—			—			69,807			1,524,291
Software (b)		5		641,691			207,703		—			2,447			(1,193	)		2,431			—			853,079
Technology (c)		5		32,617			—		—			—			—			—			—			32,617
Commercial property rights (d)		10		43,258			13,837		—			(68	)		(1,958	)		—			—			55,069
Distribution rights		6		125,539			—		—			—			—			—			17,130			142,669
Brands (e)		—		112,936			—		—			—			—			607			—			113,543
Trademark rights (e)		39		—			—		—			—			—			—			114,792			114,792
Others (f)		10		39,172			420		—			—			—			922			—			40,514

				2,449,697			221,960		—			2,379			(3,151	)		3,960			201,729			2,876,574

Accumulated amortization:
Software				(396,702	)		—		(59,579	)		(5	)		1,191			(1,704	)		—			(456,799	)
Technology				(32,469	)		—		(72	)		—			—			—			—			(32,541	)
Commercial property rights				(19,568	)		—		(3,689	)		8			1,957			—			—			(21,292	)
Distribution rights				(86,012	)		—		—			—			—			—			(10,692	)		(96,704	)
Others				(23,310	)		—		(7,883	)		—			—			(3	)		—			(31,196	)

				(558,061	)		—		(71,223	)		3			3,148			(1,707	)		(10,692	)		(638,532	)

Net amount				1,891,636			221,960		(71,223	)		2,382			(3	)		2,253			191,037			2,238,042

The amortization expenses were recognized in the financial statements as shown below:


	2019		2018		2017
Inventories and cost of products and services sold		11,183		15,044		2,165
Selling and marketing		3,872		8,920		11,689
General and administrative		105,437		75,370		57,369

		120,492		99,334		71,223

a. Goodwill

The balance of the goodwill is tested annually for impairment and is represented by the following acquisitions:


	Segment		12/31/2019			12/31/2018
Goodwill on the acquisition of:
Extrafarma		Extrafarma		661,553			661,553
Extrafarma – impairment		Extrafarma		(593,280	)		—

Extrafarma – net		Extrafarma		68,273			661,553
Ipiranga (1)		Ipiranga		276,724			276,724
União Terminais		Ultracargo		211,089			211,089
Texaco		Ipiranga		177,759			177,759
Iconic (CBLSA)		Ipiranga		69,807			69,807
Oxiteno Uruguay		Oxiteno		44,856			44,856
Temmar		Ultracargo		43,781			43,781
DNP		Ipiranga		24,736			24,736
Repsol		Ultragaz		13,403			13,403
TEAS		Ultracargo		797			797
Others		Oxiteno		583			583

				931,808			1,525,088

(1)	Including R$ 246,163 at Ultrapar.

On December 31, 2019, the Company tested the balances of goodwill shown in the table above for impairment. The determination of value in use involves assumptions, judgments, and estimates of cash flows, such as growth rates of revenues, costs and expenses, estimates of investments and working capital, and discount rates. The assumptions about growth projections and future cash flows are based on the Company’s business plan of its operating segments, as well as comparable market data, and represent management’s best estimate of the economic conditions that will exist over the economic life of the various CGUs, to which goodwill is related.

The main

key-assumptions

used by the Company to calculate the value in use are described below:

Period of evaluation

: the evaluation of the value in use is calculated for a period of five years (except the Extrafarma segment), after which the Company calculated the perpetuity, considering the possibility of carrying the business on indefinitely. For the Extrafarma segment, a period of ten years was used due to a four-year period of maturity of new stores.

Discount and real growth rates

: on December 31, 2019, the discount and real growth rates used to extrapolate the projections ranged from 8.9% to 12.1% and from 0% to 1% p.a., respectively, depending on the CGU analyzed.

Revenue from sales and services, costs and expenses, and gross margin

: considers the budget prepared for 2020 and the long-term strategic plan prepared by management and approved by the Board of Directors.

The goodwill impairment tests and net assets of the Company and its subsidiaries result in the recognition of impairment in the amount of R$ 593,280 for subsidiary Extrafarma for the year ended December 31, 2019 (see Note 2.u).

The Company assessed a sensitivity analysis of discount and growth rate of perpetuity, due to their significant impact on cash flows and value in use. An increase of 0.5 percentage points in the discount rate or a decrease of 0.5 percentage points in the growth rate of the perpetuity of the cash flow of each business segment would not result in the recognition of impairment.

b. Software

Includes user licenses and costs for the implementation of the various systems used by the Company and its subsidiaries, such as: integrated management and control, financial management, foreign trade, industrial automation, operational and storage management, accounting information, and other systems.

c. Technology

The subsidiaries Oxiteno S.A. and Oleoquímica recognize as technology certain rights of use held by them. Such licenses include the production of ethylene oxide, ethylene glycols, ethanolamines, glycol ethers, ethoxylates, solvents, fatty acids from vegetable oils, fatty alcohols, and specialty chemicals, which are products that are supplied to various industries.

d. Brands and Trademark rights

Brands are represented by the acquisition cost of the ‘am/pm’ brand in Brazil and of the Extrafarma brand, acquired in the business combination, and Chevron and Texaco trademark rights.

e. Other intangibles

Refers mainly to the loyalty program “Clube Extrafarma”.