Accounting policy


At the end of each reporting period, the Group reviews whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the CGU to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are allocated to individual CGUs, or otherwise they are allocated to the smallest group of CGUs for which a reasonable and consistent allocation basis can be identified.

The recoverable amount is the higher of the fair value less costs to sell and the value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate. Future cash flows are adjusted for risks not incorporated into the discount rate.

If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset (or CGU) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

Assets other than non-current assets held for sale

In accordance with IAS 36 Impairment of Assets, the recoverable amount of property, plant, and equipment, intangible assets, CGUs or groups of CGUs, including goodwill, and equity method investees corresponds to the higher of their fair value less costs of disposal and their value in use. The latter equals the present value of the future cash flows expected to be derived from each asset, CGU or group of CGUs, and equity method investees and is determined using the following inputs:

  • business plan approved by management based on growth and profitability assumptions, taking into account past performances, forecast changes in the economic environment, and expected market developments. Such business plan generally covers five years, unless management is confident that projections over a longer period are reliable,
  • consideration of a terminal value determined from the cash flows obtained by extrapolating the cash flows of the last year of the business plan referred to above, affected by a long-term growth rate deemed appropriate for the activity and the location of the assets, and
  • discounting of expected cash flows at a rate determined using the weighted average cost of capital formula.

Discount rate

The discount rate is estimated based on an extensive benchmarking with peers, so as to reflect the return investors would require if they were to choose an investment in the underlying assets. The weighted average cost of capital used to discount future cash flows was set at 6.7% in 2017 (7.2% in 2016). The discount rate of 6.7% is in line with 2016 computation, except that the reduction in the discount rate was capped to 50 bps in 2016 (i.e. from 7.7% in 2015 to 7.2% in 2016) to avoid excess volatility.

Long-term growth rates

In 2017 and 2016, the long-term growth rate was set at 2%, except for Aroma, for which a 1% rate was set. The growth rates are consistent with the long-term average market growth rates for the respective CGUs and the countries in which they operate.

Other key assumptions are specific to each CGU (energy price, volumes, margin, etc.).


The impairment tests performed at CGU level at December 31, 2017 and 2016 did not lead to any impairment of assets, as the recoverable amounts of the (groups of) CGUs were significantly higher than their carrying amounts. More specifically, except as described below, the difference between the (groups of) CGUs’ carrying amount and their value in use (headroom) represents in all cases more than 10% of their carrying amount. As such, for those CGUs or groups of CGUs, a reasonable change in a key assumption on which the recoverable amount of the CGUs or groups of CGUs is based would not result in an impairment loss for the related CGUs or groups of CGUs.

In this respect, for Composite Materials and Technology Solutions, which are the CGUs resulting from the acquisition of Cytec at the end of 2015, the sensitivity analysis below leads to headrooms that are around 10% of their respective carrying amounts.

Discount rate = 6.7%
Long term growth rate = 2%


Recoverable amount (in € billion)


Headroom (in € billion)



Composite Materials


Technology Solutions


Composite Materials


Technology Solutions










Sensitivity to long term growth rate -1%









Sensitivity to long term growth rate +1%


















Sensitivity to discount rate -0.5%









Sensitivity to discount rate +0.5%









An unfavorable change in growth or discount rate as disclosed above is not expected to result in an impairment.


RusVinyl is a Russian joint venture in chlorovinyls (Operating Segment: Performance Chemicals) in which Solvay holds a 50% equity interest and Sibur holds the other 50% equity interest.

The recoverable amount of the investment has been estimated based on a dividend discount model taking into account the latest business plan. It is highly sensitive to the RUB/€ exchange rate. This rate impacts the carrying amount of the investment, the foreign currency losses on the euro denominated debt, and consequently the distributable earnings potential. The impairment test confirms that the value-in-use (based on dividend discount model) is in line with the carrying amount.


Impairment losses have been recognized in 2017 with respect to the retained Latin American assets in the Polyamides business (€91 million).

Impairment losses have been recognized in 2016 mainly with respect to the following assets: the Egyptian Soda Ash plant following the mothballing decision (€82 million – Operating Segment: Performance Chemicals), Brazilian electricity cogeneration assets following adverse market conditions (€28 million – Operating Segment: Corporate and Business Services), the Coleopterre assets (€16 million – Operating Segment: Advanced Materials), and the US torrefied biomass electricity generation project following the decision to exit the project (€10 million – Operating Segment: Corporate and Business Services).

Non-current assets held for sale

No impairment has been identified for business classified as non-current assets held for sale at the end of 2017.

On May 2, 2016, Solvay entered into a Share Purchase Agreement with Unipar Carbocloro for the sale of its equity interests held in Solvay Indupa. During the third quarter of 2016, the fair value less cost to sell had been updated, so as to reflect the impact of the worsening of the business environment on the deal. An impairment loss of €63 million was recognized in 2016.