Intangible Assets and Others, net

12 Months Ended

Dec. 31, 2020

Disclosure of detailed information about intangible assets [abstract]

Intangible Assets and Others, net

Note 14 - Intangible Assets and Others, net

A.         Composition:

	Licenses and frequencies		Information systems			Software			Customer acquisition cost			Goodwill		Customer relations and other			Total
	NIS millions
Cost
Balance as of January 1, 2019		552		296			41			258			809		315			2,271
Additions		-		84			9			138			-		-			231
Deductions		-		(65	)		(13	)		-			-		(6	)		(84	)
Balance as of December 31, 2019		552		315			37			396			809		309			2,418
Additions		38		64			2			131			-		-			235
Business combination		45		-			8			62			754		146			1,015
Discontinunce of consolidation		-		(14	)		-			(3	)		-		-			(17	)
Deductions		-		(62	)		(8	)		-			-					(70	)
Balance as of December 31, 2020		635		303			39			586			1,563		455			3,581
Accumulated depreciation
Balance as of January 1, 2019		416		115			23			107			-		312			973
Depreciation for the year		15		78			7			126			-		3			229
Deduction of depreciation		-		(60	)		(12	)		-			-		(6	)		(78	)
Balance as of December 31, 2019		431		133			18			233			-		309			1,124
Depreciation for the year		16		94			6			132			-		7			255
Business combination		45		-			2			43			-		-			90
Discontinunce of consolidation		-		(6	)		-			(1	)		-		-			(7	)
Deduction of depreciation		-		(62	)		(7	)		-			-		-			(69	)
Balance as of December 31, 2020		492		159			19			407			-		316			1,393
Amortized balance as of January 1, 2019		136		181			18			151			809		3			1,298
Amortized balance as of December 31, 2019		121		182			19			163			809		-			1,294
Amortized balance as of December 31, 2020		143		144			20			179			1,563		139			2,188

The Group purchases in the ordinary course of business some of its Intangible assets on credit. The cost of acquisitions, which has not yet been paid at the reporting date, amounted to ILS 67 million (December 31, 2019 and 2018, ILS 34 million and ILS 37 million, respectively).

B.         Impairment testing for cash-generating units containing goodwill

The recoverable amount of each of the Company's cash-generating units was evaluated by the company with the assistance of an independent external appraiser using the Value In Use model which was calculated using discounted cash flows method based on a projected five-year cash flows. The five-year projected cash flows were estimated in light of the long-term growth rate. The Company used a relevant discount rate, which reflected the specific risks associated with the future cash flows of its cash-generating units. The carrying amount of the goodwill allocated to the cellular-segment and fixed-line segment as of December 31, 2020 amount ILS 831 million and ILS 732 million, respectively.

Actual results may differ from those assumed in the Company's valuation method. It is reasonably possible that the Company's assumptions described above could change in future periods. If any of these were to vary materially from the Company's plans, it may record impairment of goodwill in the future.

 These assumptions are as follows:

	Cash generating unit			Cash generating unit
	Cellular segment			Fixed-line segment
Pre-tax discount rate		9.1	%		9.2	%
Terminal value growth rate		1.5	%		1.5	%
Market share		30.0	%		N/	R
ARPU	NIS 52.5				N/	R

1. The discount rate and the terminal value growth rate are denominated in real terms.

2. The cash generating units have cash flows for 5 years, as included in their discounted cash flow model.

3. The long-term growth rate has been determined as 1.5% which represents, among others, the natural population growth rate.

4. The pre-tax discount rate is estimated and calculated using several assumptions, among others, cash generating units' Cost of Equity, risk premium for normative debt leveraging of the Group and estimates of the normative leverage ratio for the industry.

5. ARPU (Average revenue per user) in terminal year (except revenue from hosting services and national roaming services), in NIS.

  Sensitivity to changes in assumptions

The estimated recoverable amount of the cash generating units exceeds their carrying amount by approximately NIS 839 million and NIS 393 million in Cellular segment and Fixed-line segment respectively. Management has identified key assumptions for which there reasonably could be a possible change that could cause the carrying amount to exceed the recoverable amount. The table below shows the amount that these assumptions are required to change individually in order for the estimated recoverable amount to be equal to the carrying amount:

	Cash generating unit			Cash generating unit
	Cellular segment			Fixed-line segment
Pre-tax discount rate		10.8	%		10.7	%
Terminal value growth rate		(1.16	)%		(0.1	)%
Market share		28.1	%		N/	R
ARPU	NIS 50.5				N/	R

Based on the above valuation performed, the Company concluded that the recoverable amount of its cash generating units as of December 31, 2020, is higher than their carrying amount and thus, no impairment was recognized.

Determination of the fair value of cash generating units requires significant discretion, including considerations regarding the appropriate capital rates, final growth rates, weighted costs of capital and, the amount and timing of the expected future cash flows. the Company will continue to monitor the recoverable amount of its cash generating units to determine whether events and changes in circumstances such as deterioration in the business climate or operating results, continuous decline in the share price, changes in management’s business strategy or downward adjustments to the Company’ cash flows projections, warrant further impairment testing in future periods.