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.