20. Intangible assets - €19,089 million

 

A breakdown of and changes in intangible assets for 2019 are shown below:

Millions of euro

Development costs

Industrial patents & intellectual property rights

Concessions, licenses, trademarks and similar rights

Service concession arrangements

Other

Leasehold improvements

Assets under development and advances

Contract costs

Total

Cost net of accumulated impairment

42

2,352

15,246

6,899

3,294

-

985

986

29,804

Accumulated depreciation

19

1,987

1,705

4,119

2,479

-

-

481

10,790

Balance at Dec. 31, 2018

23

365

13,541

2,780

815

-

985

505

19,014

Capital expenditure

1

120

1

-

46

-

562

293

1,023

Assets entering service

12

306

6

-

255

-

(579)

-

-

Exchange differences

-

(4)

(104)

(45)

(2)

-

(18)

-

(173)

Change in the scope of consolidation

4

1

1

-

50

7

144

-

207

Disposals

-

-

-

(14)

-

-

(1)

1

(14)

Depreciation

(4)

(226)

(206)

(373)

(283)

-

-

(187)

(1,279)

Impairment losses

-

(2)

(1)

-

(82)

-

(3)

(1)

(89)

Reversals of impairment losses

-

-

4

-

-

-

-

-

4

Other changes

(13)

22

4

269

146

-

(18)

(2)

408

Reclassifications from/to assets held for sale

-

-

-

-

-

-

(12)

-

(12)

Total changes

-

217

(295)

(163)

130

7

75

104

75

Cost net of accumulated impairment

46

2,767

15,083

6,987

3,747

10

1,060

1,275

30,975

Accumulated depreciation

23

2,185

1,837

4,370

2,802

3

-

666

11,886

Balance at Dec. 31, 2019

23

582

13,246

2,617

945

7

1,060

609

19,089

In 2019, intangible assets registered a net increase of €75 million. The rise mainly reflects the capitalization of the Group’s new investments in digital transformation initiatives and a number of acquisitions of highly innovative industrial assets. Industrial patents and intellectual property rights relate mainly to costs incurred in purchasing software and open-ended software licenses. The most important applications relate to invoicing and customer management, the development of Internet portals and the management of company systems. The increase recorded in 2019 (+59%) is mainly due to the Group’s investments in digital transformation initiatives. Among these, the “Digitaly” project deserves special mention (€55.5 million). It seeks to introduce digital technologies and applications, making it possible to simplify our organizational model and redesign certain key processes and operating approaches, increasing their effectiveness and overall efficiency. The item also includes the portion of the value of patents that can be recognized in accordance with the provisions of the international accounting standards. Amortization is calculated on a straight-line basis over the asset’s residual useful life. Concessions, licenses, trademarks and similar rights include the costs incurred for the acquisition of customers by the foreign electricity distribution and gas sales companies. Amortization is calculated on a straight-line basis over the term of the average period of the relationship with customers or of the concessions.

The following table reports service concession arrangements that do not fall within the scope of IFRIC 12 and had a balance as at December 31, 2019.

Millions of euro

        
 

Grantor

Activity

Country

Concession period

Concession period remaining

Renewal option

at Dec. 31, 2019

Initial fair value

Endesa Distribución Eléctrica

-

Electricity distribution

Spain

Indefinite

Indefinite

-

5,678

5,673

Codensa

Republic of Colombia

Electricity distribution

Colombia

Indefinite

Indefinite

-

1,469

1,839

Enel Distribución Chile (formerly Chilectra)

Republic of Chile

Electricity distribution

Chile

Indefinite

Indefinite

-

1,433

1,667

Enel Distribución Perú (formerly Empresa de Distribución Eléctrica de Lima Norte)

Republic of Peru

Electricity distribution

Peru

Indefinite

Indefinite

-

638

548

Enel Distribuţie Muntenia

Romanian Ministry for the Economy

Electricity distribution

Romania

2005-2054

34 years

Yes

131

191

The item includes assets with an indefinite useful life in the amount of €9,218 million (€9,271 million at December 31, 2018), essentially accounted for by concessions for distribution activities in Spain (€5,678 million), Colombia (€1,469 million), Chile (€1,433 million), and Peru (€638 million), for which there is no statutory or currently predictable expiration date. On the basis of the forecasts developed, cash flows for each CGU, with which the various concessions are associated, are sufficient to recover the carrying amount. The change during the year is essentially attributable to changes in exchange rates. For more information on service concession arrangements, see note 17.

“Other” intangible assets mainly consist of investments in digital applications for which there is no ownership title or use license, as well as customer lists acquired externally and other intangible assets of various types.

The change in the scope of consolidation for 2019 mainly refers to the companies acquired in North America from EGPNA REP.

Impairment losses amounted to €89 million in 2019. For more information, see note 9.e.

Other changes include the reclassification of public-to-private service concession agreements (under development) to non-current assets deriving from contracts with customers in Brazil in application of IFRS 15.