Intangible Assets and Goodwill

12 Months Ended

Dec. 31, 2022

14 Intangible Assets and Goodwill

The cost, weighted average amortization rates and accumulated amortization of intangible assets and goodwill comprise the following amounts:

		December 31, 2022				December 31, 2021
	Weighted average amortization rate	Cost	Accumulated amortization		Net book value		Cost	Accumulated amortization		Net book value
Software	20%	263,433	(182,711	)	80,722		247,326	(151,281	)	96,045
Customer Portfolio	8%	1,201,074	(377,891	)	823,183		1,197,381	(275,276	)	922,105
Trademarks	5%	631,582	(112,967	)	518,615		632,016	(85,658	)	546,358
Trade Agreement	8%	247,622	(28,795	)	218,827		247,622	(4,127	)	243,495
Platform content production	33%	123,251	(74,881	)	48,370		73,877	(49,583	)	24,294
Other Intangible assets	33%	39,422	(32,142	)	7,280		39,421	(32,140	)	7,281
In progress		18,958	-		18,958		3,991	-		3,991
Goodwill		3,711,721	-		3,711,721		3,694,798	-		3,694,798
		6,237,063	(809,387	)	5,427,676		6,136,432	(598,065	)	5,538,367

Changes in intangible assets and goodwill were as follows:

	Software		Customer Portfolio		Trademarks		Trade Agreement		Platform content production		Other Intangible assets		In progress	Goodwill	Total
As of December 31, 2021 (i)	96,045		922,105		546,358		243,495		24,294		7,281		3,991	3,694,798	5,538,367
Additions	12,881		-		-		-		62,722		17		14,967	-	90,587
Additions through business combinations	3,225		3,833		-		-		-		-		-	16,923	23,981
Disposals	-		(140	)	(434	)	-		(13,348	)	(15	)	-	-	(13,937	)
Amortization	(31,430	)	(102,615	)	(27,309	)	(24,668	)	(25,298	)	( 3	)	-	-	(211,323	)
As of December 31, 2022	80,722		823,183		518,615		218,827		48,370		7,280		18,958	3,711,721	5,427,676

(i)	Considers the review of goodwill and intangibles assets of the acquisition of EMME and Redação Nota Mil, acquired during the year 2021.

	Software		Customer Portfolio		Trademarks		Trade Agreement		Platform content production (i)		Other intangible assets		In progress		Goodwill (ii)	Total
As of December 31, 2020	83,414		928,858		573,586		-		23,821		6,243		999		3,307,805	4,924,726
Additions	25,560		-		-		-		20,808		39		9,509		-	55,916
Additions through business combinations	11,036		83,589		-		247,622		-		1,099		-		387,074	730,419
Amortization	(30,482	)	(90,342	)	(27,309	)	(4,127	)	(20,335	)	(100	)	-		-	(172,695	)
Transfers	6,517		-		-		-		-		-		(6,517	)	-	-
As of December 31, 2021	96,045		922,105		546,277		243,495		24,294		7,281		3,991		3,694,879	5,538,367

(i)	Substantially refers to development of the projects related to Plurall Platform. The Company has invested in changes in its digital platform that include “Plurall Digital Transformation” in the amount of R$ 20,808 million, and project related to learning systems, in the amount of R$ 9,509 million.
(ii)	The Company recognized R$ 387,074 as goodwill on SEL, Redação Nota 1000, EMME and De Gouges acquisition, see Note 5.

(i)	Goodwill impairment test

The Company performed its annual impairment test in 2022 and 2021 The Company also carried out a sensitivity analysis in the long-term model and cash flows. The conclusion of these tests conducted by the Company for the years ended December 31, 2022 and 2021, showed that no adjustments were required to these assets.

The Company is comprised of two separate CGUs (each one of its reportable operating segments, as per Note 28), for which the recoverable amount has been determined based on value-in-use calculations, Goodwill is allocated to each CGU as shown below:

	December 31, 2022	December 31, 2021
Content and Edtech Platform	3,674,034	3,674,036
Digital Platform	37,687	20,843
	3,711,721	3,694,879

The recoverable amount of a CGU has been determined based on value-in-use calculations. These calculations use pre-income tax and social contribution cash flow projections based on financial budget approved by management covering a period of eight years. Cash Flows beyond that period are extrapolated using growth rates. The growth rate does not exceed the long-term average growth rate for the business that CGU operates.

For each of the CGUs, the key assumptions, long-term growth rate and discount rate used in the value-in-use calculations are stated in the table below. In addition, the recoverable amount is also disclosed in the table. The key assumptions used for value-in-use calculations as of December 31, 2022 and 2021 are as follows:

			2022				2021
	Content and EdTech Platform		Digital Platform		Content and EdTech Platform		Digital Platform
Growth rate - %	13.70	%	12.5	%	14.40	%	9.7	%
Discount rate - %	12.10	%	12.10	%	10.81	%	10.81	%
Growth rate (%) in perpetuity	4.7	%	4.7	%	5.8	%	5.8	%
Years projected	8		8		8		8

Growth rate is based on assumptions defined by the Company’s management, underpinned by business performance compared with other competitors and based on internal measures (new initiatives and services provided) taken into consideration. The discount rate is determined by individual WACC (weighted average working capital), net of income taxes.

The assumptions of the long-term model used in the impairment test calculation were assessed and approved by the Business’ Management, as well as the rates used.

(ii)	Impairment of other intangible assets and in progress

There were no indications of impairment of intangible assets for the years ended December 31, 2022 and 2021. Additionally, intangible assets stated as “in progress” were assessed for impairment by comparing its carrying amount with its recoverable amount and no adjustments were considered necessary.