2.6 INTANGIBLE ASSETS

GOODWILL Goodwill arising from business combination is initially recog- nised at the acquisition date as described in the notes related to Business combinations .

Goodwill is included within intangible assets with an indef- inite useful life, and therefore, is not amortised but subject to im- pairment test performed annually or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable. After the initial recognition, goodwill is meas- ured at acquisition cost less accumulated impairment.

As part of the IFRS first time adoption, the Group chose not to apply IFRS 3 Business combinations retrospectively re- garding acquisitions made prior to the transition date (1 January 2009); consequently, goodwill resulting from acquisitions prior to the transition date to IFRS is still recorded under Italian GAAP, pri- or to any eventual impairment.

For further details please refer to note 2.7 Impairment of non-financial assets .

BRANDS Separately acquired brands are shown at historical cost. Brands acquired in a business combination are recognised at fair value at the acquisition date.

Brands have a indefinite useful life and are carried at cost less accumulated impairment. Brands are not amortised but sub- ject to impairment test performed annually or more frequently if events or changes in circumstances indicate that the carrying val- ue may not be recoverable.

For further details please refer to note 2.7 Impairment of non-financial assets .

INTANGIBLE ASSETS OTHER THAN GOODWILL AND BRANDS License rights are capitalised as intangible asset and amortised on a straight-line basis over their useful economic life. The useful economic life of license rights is determined on a case-by-case basis, in accordance with the terms of the underlying agreement.

Key money are capitalised in connection with the opening of new directly operated store ( DOS ) based on the amount paid. Key money in general have a definite useful life which is general- ly in line with the lease period. However, in certain circumstanc- es, key money have an indefinite useful life on the basis of legal protection or common practice that can be found in jurisdictions or markets that state that a refund could be received at the end of the lease period. In these limited cases, that need to be adequate- ly supported, key money are not amortised but subject to impair- ment test at least annually in accordance with what set out in the note related to impairment of non-financial assets.

Software (including licenses and separately identifiable ex- ternal development costs) is capitalised as intangible assets at purchase price, plus any directly attributable cost of preparing that asset for its intended use. Software and other intangible as- sets that are acquired by the Group and have definite useful lives are measured at cost less accumulated amortisation and accumu- lated impairment losses.

AMORTISATION OF INTANGIBLE ASSETS WITH A DEFINITE USEFUL LIFE Intangible assets with a definite useful life are amortised on a straight line basis over their estimated useful lives as described in the following table:

Category Depreciation period License rights Based on market conditions within the licence period or legal limits to use the assets Key money Based on market conditions generally within the lease period Software From 3 to 5 years Order backlog Based on fulfillment of the order backlog indentified in PPA Other intangible assets Based on market conditions generally within the period of control over the asset

2.7 IMPAIRMENT OF NON-FINANCIAL ASSETS

At least once a year the Group verifi es whether there is any indication that intangible assets with a defi nite use- ful life and property, plant and equipment have become impaired. If such evidence exists, the carrying amount of the assets is reduced to its recoverable amount.

Goodwill and assets with an indefinite useful life are not subject to amortisation and are tested annually or more frequently for im- pairment, whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. When the recoverable amount for individual asset cannot be reli- ably estimated, the Group determines the recoverable amount of the cash-generating unit to which the asset belongs. The recover- able amount is the higher of an asset s fair value less costs to sell and value-in-use. The Group determines the value in use as the present value of future cash flows expected to be derived from the asset or from the cash-generating unit, gross of tax effects, by ap- plying an appropriate discount rate that reflects market time value of money and the risks inherent to the asset. An impairment loss is recognised for the amount by which the carrying amount exceeds its recoverable amount.

With the exception of impairment losses recognised on goodwill, when the circumstances that led to the loss no longer exist, the carrying amount of the asset is increased to its recov- erable amount and cannot exceed the carrying amount that would have been determined had there been no loss in value. The rever- sal of an impairment loss is recognised immediately in the consol- idated income statement.

For impairment testing purposes, Moncler goodwill and Moncler brand are measured with respect to the group of CGUs that compose the entire Moncler business. Stone Island goodwill and Stone Island brand are measured with respect to the Stone Island CGU, which coincides with the entire Stone Island group.

As of 2019, IFRS 16 requires the recognition of a right of use asset and a liability for the obligation to pay rent in the financial statements. Any impairment of the asset for the right of use must be calculated and recognised in accordance with the provisions of IAS 36.

For the purpose of the rights-of-use impairment test related to Moncler business, the following CGUs have been defined, which coincide with the organisational units responsible for monitoring individual markets ( Regions ): EMEA Region; Americas Region; APAC Region; Japan Region; Korea Region. The rights-of-use of each individual CGU is subject to impair- ment tests in the presence of triggering events (for the individu- al CGU) identified by a possible impairment and signalled by the following key performance indicators: divestment plans; below expectation performance indicators; operational losses. The impairment test is carried out with the following methods: calculation of the CGU s gross value in use, excluding that

related to the lease liability from cash flows; calculation of the CGU s recoverable amount, by deducting

the carrying value of the lease liability from the gross value in use;

comparison of the CGU s recoverable value with the carry- ing value, the latter calculated net of the carrying value of the lease liability.

In calculating the value in use, the discount rate used is the WACC for the geographical area to which it belongs, the aggregate value of which determines the Group WACC.

CONSOLIDATED FINANCIAL STATEMENTS112 113CONSOLIDATED FINANCIAL STATEMENTS MONCLER GROUP

2021