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 based on the cash flows obtained by extrapolating the cash flows of the last years 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;
  • 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 6.2% in 2018 (6.7% in 2017). The discount rate decrease in 2018 is related to the change in the country-risk premium component, which is for 2018 the weighted average country premium (based on invested capital weight) instead of taking into account only the Belgian risk premium as in 2017.

Long-term growth rates

In 2018 and 2017, the long-term growth rate was set at 2%, except for Aroma Performance, 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.).

No impairment loss for fully consolidated CGUs in 2018

The impairment tests performed at CGU level at December 31, 2018 and 2017 did not lead to any impairment of assets, as the recoverable amounts of the (groups of) CGUs were higher than their carrying amounts. More specifically, the difference between the (groups of) CGUs’ value in use and their carrying amount (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.

Impairment test 2018 – Sensitivities for Composite Materials

Composite Materials is a CGU that formed part of the Cytec acquisition at year-end 2015 (Operating Segment: Advanced Materials). This CGU has a carrying amount of € 3.3 billion, including goodwill of € 1.3 billion (see note F21 Goodwill and business combinations). The headroom for Composite Materials (being the difference between the value in use based on discounted cash flows and the carrying amount) is close to € 0.7 billion, or close to 20% of the carrying amount.

The expected cash flows for Composite Materials reflect the strong demand drivers and a portion only of Management’s expectations and plans related to Excellence programs that aim to improve industrial effectiveness and maximize the conversion of sales growth into EBITDA and cash flow progression. In compliance with IFRS, expected cash flows for Composite Materials take into account only the impact of Excellence programs that have been approved by Management and that are being carried out.

The headroom of this CGU is sensitive to change in assumptions related to discount rate and long-term growth. Under the sensitivities below, this headroom remains positive, although below 10% of the carrying amount.



in € billion

Discount rate = 6.2%
Long term growth rate = 2%


Impact on recoverable amount


Revised headroom

Sensitivity to discount rate –0,5%





Sensitivity to discount rate +0,5%










Sensitivity to long term growth rate –1%





Sensitivity to long term growth rate +1%





The table below shows the break-even analysis for the headroom of Composite Materials:

Discount rate


Long term growth rate

Base rate


Break-even rate


Base rate


Break-even rate








Reversal of impairment for a cogeneration asset in Brazil

In 2018 following improved market conditions, the impairment loss related to the Brazilian electricity cogeneration asset that was recognized in 2016 has been reversed (€ 22 million – Operating Segment: Corporate and Business Services) – also see note F5 Results from portfolio management and reassessments, legacy remediation and major litigations.

Results of impairment tests for CGUs under joint control

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 2017

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