Impairment losses and impairment loss reversals

In 2009, MTU Maintenance Canada Ltd., Richmond, Canada, operating under contract to Chromalloy Gas Turbine LLC, made a successful bid for a major U.S. Air Force contract for maintenance of its KC10 tanker fleet. This contract is expected to generate revenues of U.S. $ 542 million over the next 6 years. An option also exists to extend the duration of the contract by a further 3 years. This major contract assures MTU Maintenance Canada Ltd., Richmond, Canada, of adequate future cash flows to manage its business successfully and profitably. The carrying amounts of the intangible assets and property, plant and equipment for which impairment losses were recognized in the financial years 2005 2007 were reassessed in the light of the company’s improved situation, and compared with the respective recoverable amounts. For certain items of property, plant and equipment, it was established that the recoverable amount exceeded the carrying amount, necessitating an impairment loss reversal amounting to € 1.1 million to increase the carrying amount accordingly. No impairment losses in respect of intangible assets, property, plant and equipment, or financial assets were recognized in the financial year 2009. The impairment testing of the operating segments to which goodwill has been attributed is dealt with in detail in Note 40. (Measurement of the recoverable amount of operating segments to which goodwill has been attributed).

The impairment losses recognized in the financial year 2008, totaling € 35.2 million, comprise impairment losses relating to the carrying amount of old GE engine programs amounting to € 34.3 million and of old military engine programs amounting to € 0.9 million. In each case, the carrying amount was compared with the recoverable amount. The recoverable amount was found to be lower than the carrying amount of the program, and hence an impairment loss was recognized to reduce the carrying amount to the level of the recoverable amount.

The impairment loss on intangible assets in the financial year 2007 relates to the carrying amount of a license for CF34 repair techniques employed in commercial engine maintenance. Comparison of the license’s carrying amount with its recoverable amount revealed that the latter was below the carrying amount. Hence an impairment loss of € 14.7 million, representing the full carrying amount of the CF34 license, was recognized in the income statement under cost of sales and attributed to the commercial maintenance business.