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INTANGIBLE ASSETS
 12 Months Ended
Dec. 31, 2022
Intangible Assets  
INTANGIBLE ASSETS

 

14.INTANGIBLE ASSETS

The intangible assets rollforward is set forth below:

                               
       
                                 
  Average rate (1)   12.31.21   Additions   Disposals   Business combination (2)   Transfers   Monetary correction by Hyperinflation   Exchange rate variation 12.31.22
Cost                                
Goodwill      3,425,183     -     -    (4,026)   -     171,880    (118,934)  3,474,103
Trademarks      1,733,335     -     -   -   -     203,246   (55,382)  1,881,199
Non-compete agreement     110,208     19,609    (69,950)   -   -    -     (2,441)   57,426
Outgrowers relationship      4,740     -   (4,223)   -    11    -    (11)  517
Patents      3,518     -   (1)   -   -   1,978     (617)  4,878
Customer relationship      1,119,534     -     -   -   -     381,289    (160,572)  1,340,251
Software     770,399    118    (92,163)   -    240,679    19,111     (8,054) 930,090
Intangible in progress       98,716   209,007     -   -   (224,769)   525     (6,216)   77,263
       7,265,633   228,734     (166,337)    (4,026)   15,921     778,029    (352,227)  7,765,727
                                 
Amortization                                
Non-compete agreement 62.71%     (106,749)   (5,023)     69,950   -   -    -   2,486  (39,336)
Outgrowers relationship 19.48%   (4,425)     (145)    4,223   -   -    -    -   (347)
Patents 8.08%   (2,928)     (475)     -   -   -    (715)   294 (3,824)
Customer relationship 6.92%     (437,774)     (102,727)     -   -   -    (147,827)     66,222   (622,106)
Software 52.04%     (563,943)     (175,768)     79,091   -    (5,972)    (4,925)   6,013   (665,504)
        (1,115,819)     (284,138)   153,264   -    (5,972)    (153,467)     75,015   (1,331,117)
       6,149,814    (55,404)    (13,073)    (4,026)     9,949     624,562    (277,212)  6,434,610
(1)Weighted average annual rate.
(2)The reduction on goodwill reflects the price adjustment on the business combination with Mogiana according to contractual terms of the shares purchase agreement, which has not impacted other assets and liabilities fair values on the transaction which was conclude in December 2021.

 

                             
  Average rate (1)   12.31.20   Additions   Disposals   Business combination   Transfers   Exchange rate variation 12.31.21
Cost                            
Goodwill      2,935,577     -   (6,145)     468,604     -     27,147  3,425,183
Trademarks      1,327,738     -     -     474,874     -   (69,277)  1,733,335
Non-compete agreement     107,162    1,369   (3,182)     2,246     -    2,613 110,208
Outgrowers relationship      5,328    197     (785)   -     -     -  4,740
Patents      6,205     -   (3,723)   -    1,038   (2)  3,518
Customer relationship      1,067,713     -     -     124,569     -   (72,748)  1,119,534
Software     657,255    5,220    (64,045)     1,828   172,107     (1,966) 770,399
Intangible in progress       46,054   178,059     -   -     (125,275)     (122)   98,716
       6,153,032   184,845    (77,880)     1,072,121     47,870     (114,355)  7,265,633
                             
Amortization                            
Non-compete agreement 62.71%    (97,408)    (10,086)    3,182   -     -     (2,437)   (106,749)
Outgrowers relationship 19.48%   (4,695)     (505)    775   -     -     - (4,425)
Patents 8.08%   (5,999)    (42)    3,723   -     (614)    4 (2,928)
Customer relationship 6.92%     (375,131)    (84,010)     -   -     -     21,367   (437,774)
Software 52.04%     (449,697)     (180,026)     63,920   -    3,639     (1,779)   (563,943)
        (932,930)     (274,669)     71,600   -    3,025     17,155   (1,115,819)
       5,220,102    (89,824)   (6,280)     1,072,121     50,895   (97,200)  6,149,814
(1)Weighted average annual rate.

 

 

14.1.    Impairment test

The impairment test of assets is carried out annually based on the discounted cash flow method, which is prepared in order to determine the value in use of the Company’s cash-generating units (“CGU”). In 2022, the Company used its budget, strategic and financial planning with projections until 2027 and average perpetuity of the cash generating units of 3.5% p.a., based on the history of recent years, as well as in the economic and financial projections of each market in which the Company operates, in addition to official information from independent and governmental institutions.

The discount rate used by Management to prepare discounted cash flows varied from 9.83% p.a. to 13.24% p.a. according to the CGU. The assumptions presented in the table below were also adopted:

 

                   
    2023   2024   2025   2026   2027
Inflation Brazil   5.16%   3.59%   3.93%   3.68%   3.41%
Inflation - United States   1.90%   2.29%   2.22%   2.20%   2.21%
Exchange rate - BRL / USD   5.12   5.10   5.18   5.20   5.20

 

The rates presented above don’t consider the effects of income taxes.

Based on Management’s analysis, no impairment adjustments were identified.

In addition to the analysis mentioned above, Management prepared a sensitivity analysis, in which increases and decreases 2 p.p. the operating margin1 (operating income over net sales) and the nominal discount rate and did not identify any scenarios in which an impairment was necessary.

 

1 The main assumptions contained in the margin include the projected net sales and commodity cost value.