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Impairment testing of intangible assets with indefinite useful lives | 12 Months Ended
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Dec. 31, 2022
Disclosure of impairment loss and reversal of impairment loss [abstract] |
Impairment testing of intangible assets with indefinite useful lives | 17. Impairment testing of intangible assets with indefinite useful lives Brands and other intangible assets with indefinite useful lives as well as the goodwill arising on acquisition were subject to annual impairment testing. As described in Note 3.6 and 3.7, these assets are generally valued on the basis of the present value of forecast cash flows determined in the context of multi-year business plans drawn up each fiscal year. The value in use discounted cash flow is based on a 10-year cash flow model. The Group uses a 10-year rather than a 5-year model as this accords with the Group’s long-term planning and business acquisition valuation methodology. The key judgments, estimates and assumptions used in the value in use discounted cash flow calculations are generally as follows:
| • |  | In the first three years of the model, free cash flows are based on the Group’s strategic plan as approved by key management. The Group’s strategic plan is prepared per cash-generating unit and is based on external sources in respect of macro-economic assumptions, industry, inflation and foreign exchange rates, past experience and identified initiatives in terms of market share, revenue, variable and fixed cost, capital expenditure and working capital assumptions;
| • |  | For the subsequent seven years of the model, data from the strategic plan is extrapolated generally using simplified assumptions such as macro-economic and industry assumptions, variable cost and fixed cost linked to inflation, as obtained from external sources;
| • |  | Cash flows after the first ten-year period are extrapolated generally using expected annual long-term GDP growth rates, based on external sources, in order to calculate the terminal value, considering sensitivities on this metric; and
| • |  | Projections are discounted at the unit’s post-tax weighted average cost of capital (“WACC”). Calculations are corroborated by valuation multiples, quoted share prices for publicly-traded subsidiaries or other available fair value indicators (i.e. recent market transactions from peers). The WACC was calculated for each CGU subject to impairment, considering the parameters specific to the geographical area, market risk premium and sovereign bond yield.
Although the Group believes that its judgments, assumptions and estimates are appropriate, actual results may differ from these estimates under different assumptions or market or macro-economic conditions. The Group believes that all of its estimates are reasonable: they are consistent with the Group’s internal reporting and reflect management’s best estimates. However, inherent uncertainties exist that management may not be able to control. As of December 31, 2022, the intangible assets with indefinite useful lives that are the most significant in terms of their carrying amounts and the criteria used for impairment testing are as follows:
|  | Goodwill |  |  | Brands |  |  | Long-term growth rate (bps) |
December 31, 2022 (Euro thousands) |  | Net carrying amount |  |  | WACC (bps) |  |  | Net carrying amount |  |  | WACC (bps) |  |  | Royalty rate (bps) |
Lanvin |  |  | 45,931 |  |  |  | 1,445 |  |  |  | 100,906 |  |  |  | 1,645 |  |  |  | 518 |  |  |  | 129 |
Wolford |  |  | 11,701 |  |  |  | 1,434 |  |  |  | 37,856 |  |  |  | 1,634 |  |  |  | 250 |  |  |  | 237 |
St. John |  |  | 11,691 |  |  |  | 1,436 |  |  |  | 30,271 |  |  |  | 1,636 |  |  |  | 344 |  |  |  | 248 |
Sergio Rossi |  |  | — |  |  |  | N.A. |  |  |  | 3,301 |  |  |  | 2,001 |  |  |  | 125 |  |  |  | 143 |
Total |  |  | 69,323 |  |  |  |  |  |  |  | 172,334 |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Goodwill |  |  | Brands |  |  | Long-term growth rate (bps) |
December 31, 2021 (Euro thousands) |  | Net carrying amount |  |  | WACC (bps) |  |  | Net carrying amount |  |  | WACC (bps) |  |  | Royalty rate (bps) |
Lanvin |  |  | 45,931 |  |  |  | 1,370 |  |  |  | 100,906 |  |  |  | 1,570 |  |  |  | 518 |  |  |  | 97 |
Wolford |  |  | 11,701 |  |  |  | 1,330 |  |  |  | 37,856 |  |  |  | 1,530 |  |  |  | 250 |  |  |  | 176 |
St. John |  |  | 11,691 |  |  |  | 1,346 |  |  |  | 30,271 |  |  |  | 1,546 |  |  |  | 344 |  |  |  | 188 |
Sergio Rossi |  |  | — |  |  |  | N.A. |  |  |  | 3,301 |  |  |  | 1,567 |  |  |  | 125 |  |  |  | 109 |
Total |  |  | 69,323 |  |  |  |  |  |  |  | 172,334 |  |  |  |  |  |  |  |  |  |  |  |  |
The following table details the sensitivity of the impairment testing to reasonably possible changes in key assumptions:
|  | At December 31, 2022 impairment loss due to |  |  | At December 31, 2021 impairment loss due to |
|  | Goodwill |  |  | Brand |  |  | Goodwill |  |  | Brand |
(Euro thousands) |  | WACC +10 bps |  |  | Long-term growth rate - 10 bps |  |  | WACC +10 bps |  |  | Long-term growth rate - 10 bps |  |  | Royalty Rate -10 bps |  |  | WACC +10 bps |  |  | Long-term growth rate - 10 bps |  |  | WACC +10 bps |  |  | Long-term growth rate - 10 bps |  |  | Royalty Rate -10 bps |
Lanvin |  |  | 3,810 |  |  |  | 1,522 |  |  |  | 1,002 |  |  |  | 310 |  |  |  | 2,236 |  |  |  | 4,002 |  |  |  | 1,563 |  |  |  | 1,035 |  |  |  | 330 |  |  |  | 2,178 |
Wolford |  |  | 5,904 |  |  |  | 2,507 |  |  |  | 491 |  |  |  | 172 |  |  |  | 2,053 |  |  |  | 5,356 |  |  |  | 2,888 |  |  |  | 476 |  |  |  | 219 |  |  |  | 2,004 |
St. John |  |  | 1,928 |  |  |  | 782 |  |  |  | 330 |  |  |  | 110 |  |  |  | 1,118 |  |  |  | 1,331 |  |  |  | 642 |  |  |  | 245 |  |  |  | 87 |  |  |  | 924 |
Sergio Rossi |  |  | N.A. |  |  |  | N.A. |  |  |  | 23 |  |  |  | 6 |  |  |  | 334 |  |  |  | N.A. |  |  |  | N.A. |  |  |  | 31 |  |  |  | 10 |  |  |  | 351 |
Based on events foreseeable within reason at the date of this report, the Group considers that any changes impacting the key assumptions described above would not lead to the recognition of material impairment loss against other CGUs. The Group cannot predict whether an event that triggers impairment will occur, when it will occur or how it will affect the value of the asset reported.

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