DSV Annual Report 2022

57 DSV Annual Report 2022 Consolidated financial statements 2022 = III Chapter 3 Operating assets and liabilities This chapter includes notes disclosures on the Group's invested capital that forms the basis of our business activities. Invested capital repre- sents the Group's property, plant and equip- ment, intangible assets and net working capital in the form of operating assets and liabilities. Invested capital is structured based on our asset-light business model, including our focus on minimising funds tied up in working capital to optimise the generation of available free cash flow. Invested capital also comprises significant intangible assets mainly relating to acquired goodwill from business combinations carried out over the years. 3.1 Impairment testing Accounting policies Goodwill The carrying amount of goodwill is tested for impairment at least annually together with other non-current assets of the Group. Impairment testing is performed for the lowest cash-generating unit to which consolidated goodwill is allocated, as defined by our divisional management and operational structure. The cash-generating units there- by follow our divisional structure: Air & Sea, Road and Solutions. Goodwill is written down to its recoverable amount through the income statement if lower than the carrying amount. The recoverable amount is determined as the present value of the discounted future net cash flow from the cash-generating unit to which the goodwill relates. In calculating the present value, discount rates are applied reflecting the risk-free interest rate with the addition of risks relating to the individual cash-generating units, such as geographical and financial exposure. Other non-current intangible assets, property, plant and equipment The carrying amount of other non-current assets is tested for impairment at least once a year in connection with the impairment test of goodwill. If the tests show evidence of impairment, the asset is written down to the recoverable amount through the income statement. The recoverable amount is the higher of the fair value of the asset less the expected costs to sell and its value in use. The value in use is calculated as the present value of expected future cash flows from the asset or the division of which the asset forms part. Management judgements and estimates For goodwill impairment testing, a number of estimates are made on the development in revenues, gross profits, operating margins, future capital expenditures, discount rates and growth expectations in the terminal peri- od. These are based on an assessment of current and future developments in the three cash-generating units and on historical data and assumptions of future expected market developments, including expected long-term average market growth rates. Material value drivers affecting the future net cash flows of the three cash-generating units are: Air & Sea The Air & Sea division operates globally, so developments in the global economy and world trade therefore have a material impact on the divi- sion's future net cash flow. Developments in gross profit per shipment, cost management initiatives and development in internal productivity (number of shipments per employee) also affect the division's cash flow. Road The Road division mainly operates on the EMEA and US markets, which means that the division's future net cash flow is affected by the growth rate in these regions. Developments in gross profit per shipment, including truck and terminal utilisation rates, cost management initiatives and devel- opment in internal productivity (number of shipments per employee) also affect the division's cash flow. Solutions The Solutions division operates globally, so developments in the global economy and world trade therefore have a material impact on the divi- sion's future net cash flow. Developments in warehouse lease costs and costs of related services, utilisation of warehouse facilities, cost manage- ment initiatives and development in internal productivity (number of order lines per employee) also affect the division's cash flows.

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