Dechra Pharmaceuticals PLC

Dechra Pharmaceuticals PLC

Annual Report and Accounts for the year ended 30 June 2012

11. Intangible Assets

Goodwill
£'000
Software
£'000
Develop-
ment
costs
£'000
Patent
rights
£'000
Marketing
authori-
sations
£'000
Acquired
intangibles
£'000
Total
£'000
Cost
At 1 July 201020,4962,5225,8562,85985366,75999,345
Additions9641,0258212,810
Acquisitions through business combinations2,17118444,50546,860
Disposals
Foreign exchange adjustments1,58262373,7385,419
At 30 June 2011 and 1 July 201124,2493,5487,1023,680853115,002154,434
Additions1,1864475,1146,747
Acquisitions through business
combinations
36,3487478,629115,051
Disposals(61)(61)
Foreign exchange adjustments(2,676)(152)(48)(5,339)(8,215)
At 30 June 201257,9214,6567,4403,680853193,406267,956
Amortisation
At 1 July 20107541,23457116,41518,974
Charge for the year3168812278,93810,362
At 30 June 2011 and 1 July 20111,0702,11579825,35329,336
Charge for the year5511,00533510,87112,762
Disposals(14)(14)
At 30 June 20121,6213,1061,13336,22442,084
Net book value
At 30 June 201257,9213,0354,3342,547853157,182225,872
At 30 June 2011 and 1 July 201124,2492,4784,9872,88285389,649125,098
At 30 June 201020,4961,7684,6222,28885350,34480,371
2012
£'000
2011
£'000
Contracted capital commitments616609
Software assets in the course of construction included above638857

Goodwill is allocated across cash-generating units that are expected to benefit from that business combination. Key assumptions made in this respect are given in note 13.

In accordance with the disclosure requirements of IAS 38 'Intangible Assets' the components of acquired intangibles are summarised below:

Acquired
Development
Costs
£'000
Product
Rights
£'000
Customer
Relationships
£'000
Total
£'000
Cost
At 1 July 201066,38237766,759
Acquisitions through business combinations44,50544,505
Foreign exchange adjustments3,7383,738
At 30 June 2011 and 1 July 2011114,625377115,002
Additions5,1145,114
Acquisitions through business combinations24,08054,54978,629
Foreign exchange adjustments(1,635)(3,704)(5,339)
At 30 June 201222,445170,584377193,406
Amortisation
At 1 July 201016,29911616,415
Charge for the year8,900388,938
At 30 June 2011 and 1 July 201125,19915425,353
Charge for the year10,8333810,871
At 30 June 201236,03219236,224
Net book value
At 30 June 201222,445134,552185157,182
At 30 June 2011 and 1 July 201189,42622389,649
At 30 June 201050,08326150,344

The amortisation charge is recognised within administrative expenses in the income statement.

The principal assets within acquired intangibles are the development costs and product rights recognised on the acquisitions of Dechra Veterinary Products Holding A/S, DermaPet Inc., Genitrix Limited and Eurovet Animal Health B.V. The carrying value of these assets at 30 June 2012 was £145.1 million with a remaining amortisation period of 5½ years, 13½ years, 8½ years and 10 years respectively. The other significant assets within acquired intangibles are the product rights recognised on the acquisition of Pharmaderm Animal Health and HY-50. The carrying value at 30 June 2012 was £1.7 million and £4.9 million with a remaining amortisation period of 11 years and 9½ years respectively.

The principal asset within patent rights comprises payments to acquire the right to develop and market Trilostane, the active ingredient of Vetoryl Capsules, for animal health applications in the USA and Canada. The carrying value at 30 June 2012 was £1.5 million with a remaining amortisation period of 6½ years. The rights to Equidone, which was launched in the US during 2011, has a carrying value of £0.7 million with an amortisation period of 9 years.

£822,000 of the marketing authorisations relate to the Vetivex range of products. The Vetivex marketing authorisations are regarded as having indefinite useful economic lives and have not been amortised. Ownership of the marketing authorisations rests with the Group in perpetuity. There are not believed to be any legal, regulatory or contractual provisions that limit their useful lives. Vetivex is an established range of products which are relatively simple in nature and there are a limited number of players in the market. Accordingly, the Directors believe that it is appropriate that the marketing authorisations are treated as having indefinite lives for accounting purposes.

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