Intangible Assets

12 Months Ended

Dec. 31, 2020

Text block [abstract]

Intangible Assets

17 INTANGIBLE ASSETS

The movement in intangible assets and the related accumulated amortization as of December 31, 2018, 2019 and 2020 is as follows:

	Goodwill			Trade- marks			Concession rights			Contractual relations with clients			Software and development costs			Costs of development of wells			Land use rights		Other assets			Total
At January 1, 2018
Cost		193,862			110,486			879,289			100,640			66,301			400,429			13,288		51,983			1,816,278
Accumulated amortization and impairment		(77,058	)		(45,386	)		(351,062	)		(66,375	)		(48,677	)		(283,696	)		—		(3,954	)		(876,208	)
Net cost		116,804			65,100			528,227			34,265			17,624			116,733			13,288		48,029			940,070
Net initial cost		116,804			65,100			528,227			34,265			17,624			116,733			13,288		48,029			940,070
Additions		—			—			23,803			—			3,267			68,544			—		5,067			100,681
Capitalization of interest		—			—			3,361			—			—			—			—		—			3,361
Desconsolidation, net		(20,086	)		—			(20,716	)		—			(10,153	)		—			—		(219	)		(51,174	)
Transfers from assets under construction		—			—			—			—			199			—			—		(199	)		—
Derecognition - cost		—			—			(16	)		—			(1,941	)		(4,126	)		—		—			(6,083	)
Amortization		—			—			(50,776	)		(7,996	)		(5,834	)		(41,930	)		—		(5,536	)		(112,072	)
Translations adjustments		(3,430	)		(4,301	)		199			(303	)		830			—			—		272			(6,733	)
Net final cost		93,288			60,799			484,082			25,966			3,992			139,221			13,288		47,414			868,050
At December 31, 2018
Cost		170,346			106,185			885,915			100,337			22,565			464,847			13,288		55,131			1,818,614
Accumulated amortization and impairment		(77,058	)		(45,386	)		(401,833	)		(74,371	)		(18,573	)		(325,626	)		—		(7,717	)		(950,564	)
Net cost		93,288			60,799			484,082			25,966			3,992			139,221			13,288		47,414			868,050

	Goodwill			Trade- marks			Concession rights			Contractual relations with clients			Software and development costs			Costs of development of wells			Land use rights			Other assets			Total
At January 1, 2019
Cost		170,346			106,185			885,915			100,337			22,565			464,847			13,288			55,131			1,818,614
Accumulated amortization and impairment		(77,058	)		(45,386	)		(401,833	)		(74,371	)		(18,573	)		(325,626	)		—			(7,717	)		(950,564	)
Net cost		93,288			60,799			484,082			25,966			3,992			139,221			13,288			47,414			868,050
Net initial cost		93,288			60,799			484,082			25,966			3,992			139,221			13,288			47,414			868,050
Additions		—			—			26,645			—			5,016			102,022			—			5,212			138,895
Capitalization of interest expenses		—			—			2,725			—			—			—			—			802			3,527
Transfers from assets under construction		—			—			—			—			672			—			—			(672	)		—
Derecognition - net		(930	)		(8,358	)		—			(11,665	)		(2,015	)		—			—			(2,996	)		(25,964	)
Amortization		—			—			(50,102	)		(3,682	)		(7,529	)		(43,552	)		—			(2,634	)		(107,499	)
Impairment loss		(33,089	)		—			(3,213	)		—			—			—			(2,468	)		—			(38,770	)
Impairment reversal		—			20,676			—			—			—			—			—			—			20,676
Translations adjustments		(1,902	)		(2,422	)		(16,187	)		(10,118	)		21,251			(3,717	)		—			8,407			(4,688	)
Net final cost		57,367			70,695			443,950			501			21,387			193,974			10,820			55,533			854,227
At December 31, 2019		—			—			—			—			—			—			—			—			—
Cost		93,887			73,836			710,290			72,810			63,278			558,530			13,288			113,057			1,698,976
Accumulated amortization and impairment		(36,520	)		(3,141	)		(266,340	)		(72,309	)		(41,891	)		(364,556	)		(2,468	)		(57,524	)		(844,749	)
Net cost		57,367			70,695			443,950			501			21,387			193,974			10,820			55,533			854,227

	Goodwill			Trade- marks			Concession rights			Contractual relations with clients			Software and development costs			Costs of development of wells			Land use rights			Other assets			Total
At January 1, 2020
Cost		93,887			73,836			710,290			72,810			63,278			558,530			13,288			113,057			1,698,976
Accumulated amortization and impairment		(36,520	)		(3,141	)		(266,340	)		(72,309	)		(41,891	)		(364,556	)		(2,468	)		(57,524	)		(844,749	)
Net cost		57,367			70,695			443,950			501			21,387			193,974			10,820			55,533			854,227
Net initial cost		57,367			70,695			443,950			501			21,387			193,974			10,820			55,533			854,227
Additions		—			—			4,412			—			1,526			37,994			—			6,473			50,405
Capitalization of interest expenses		—			—			—			—			—			—			—			1,105			1,105
Transfers from assets under construction		—			—			—			—			(64	)		(25	)		—			—			(89	)
Derecognition - net		—			—			—			—			(492	)		—			—			—			(492	)
Amortization		—			—			(52,408	)		—			(6,037	)		(36,942	)		—			(3,234	)		(98,621	)
Translations adjustments		1,579			7,810			—			22			201			—			—			—			9,612
Reclassifications		—			(84	)		(24,157	)		—			74			—			—			10			(24,157	)
Net final cost		58,946			78,421			371,797			523			16,595			195,001			10,820			59,887			791,990
At December 31, 2020
Cost		95,466			81,562			690,545			77,542			63,871			596,499			13,288			120,645			1,739,418
Accumulated amortization and impairment		(36,520	)		(3,141	)		(318,748	)		(77,019	)		(47,276	)		(401,498	)		(2,468	)		(60,758	)		(947,428	)
Net cost		58,946			78,421			371,797			523			16,595			195,001			10,820			59,887			791,990

a) Goodwill

Management reviews the results of its businesses on the basis of the type of economic activity carried on. As of December 31, the goodwill of the cash-generating units (CGUs) is distributed as follows:

	2018		2019		2020
Engineering and construction		71,621		36,632		38,211
Electromechanical		20,737		20,735		20,735
IT equipment and services		930		—		0
		93,288		57,367		58,946

As a result of management’s annual impairment tests on goodwill, the recoverable amount of cash-generating units was determined on the basis of the greater their value in use and fair value less disposal costs. The value in use was determined on the basis of expected future cash flows generated by the evaluation of CGUs.

As a result of these evaluations, in 2020, no impairment was identified. In 2019, an impairment was identified in Morelco S.A.S. for S/33 million and Adexus S.A. for S/0.9 million. Through the subsidiary Cumbra Peru S.A., the loss due to deterioration in Morelco was generated by the decrease in expected flows as a result of the reduction in the contracting of new projects during the year (“Backlog”). Additionally, the Company impaired the value of goodwill in Adexus, because the subsidiary submitted a request for bankruptcy reorganization at the Justice Court of Chile, according to Law 20.720 (Note 36).

In 2018, no provision for impairment was recorded.

The main assumptions used by the Corporation to determine fair value less disposal costs and value in use are as follows:

	Engineering and construction			Electro- mechanical
	%			%
2018
Gross margin		12.67	%		7.63	%
Terminal growth rate		3.00	%		2.00	%
Discount rate		12.55	%		11.44	%
2019
Gross margin		12.43	%		8.86	%
Terminal growth rate		3.00	%		2.00	%
Discount rate		11.83	%		11.40	%
2020
Gross margin		12.50	%		9.36	%
Terminal growth rate		3.00	%		2.00	%
Discount rate		11.06	%		11.77	%

These assumptions have been used for the analysis of each CGUs for a period of 5 years.

Management determines budgeted gross margins based on past results and market development expectations. Average growth rates are consistent with those prevailing in the industry. The discount rates used are pre-tax or post-tax, as applicable, and reflect the specific risks associated with the CGUs evaluated.

b) Trademarks

This item mainly includes the brands acquired in the business combination processes with Vial y Vives S.A.C. (S/75.4 million) in August 2013, Morelco S.A.S. (S/33.33 million) in December 2014 and Adexus S.A. (S/9.1 million) in August 2016. Management determined that the brands from Vial y Vives, Morelco and Adexus have indefinite useful lives; consequently, annual impairment tests are performed on these intangible assets as explained in paragraph a) above.

As a result of these evaluations, in 2020, no impairment was identified. In 2019, the Vial y Vives - DSD the brand impairment was reversed for S/20.7 million (equivalent to CLP4,782 million). Management considered that the market value of the brand has increased due to the increase of projects in execution and projects and award process.

Additionally, in 2019, the Company impaired the value of the Adexus brand, because the subsidiary submitted a request for bankruptcy reorganization before the courts of justice of Chile, under the law 20.720 of that country (Note 36). In 2018, no provision for impairment was recorded.

The main assumptions used by the Corporation to determine fair value less cost of sales are as follows:

	Engineering and construction
	Morelco			Vial y Vives- DSD
	%			%
2018
Average revenue growth rate		12.25	%		19.58	%
Terminal growth rate		3.00	%		3.00	%
Discount rate		12.55	%		14.00	%
2019
Average revenue growth rate		5.70	%		19.58	%
Terminal growth rate		3.00	%		2.00	%
Discount rate		11.83	%		14.12	%
2020
Average revenue growth rate		7.60	%		5.00	%
Terminal growth rate		3.00	%		2.10	%
Discount rate		11.06	%		13.16	%

c) Concessions

As of December 31, mainly include intangibles of Norvial S.A.:

	2019		2020
EPC Contract		62,319		54,506
Construction of the second tranch of the “Ancon- Huacho-Pativilca” highway		4,809		3,406
Cost of capitalized indebtedness at effective interest rates between 7.14% and 8.72%		950		—
Road improvement		14,449		12,922
Implementation for road safety		8,152		9,034
Work capitalization of second roadway		314,614		280,326
Disbursements for land adquisition		4,233		4,510
Other intangible assets contracted for the delivery process		7,477		5,026
Total Norvial S.A.		417,003		369,730
Other concessions		26,947		2,067
		443,950		371,797

Additionally, the reclassification presented includes S/21.8 million from Concesionaria Via Expresa Sur S.A. which was transferred to other accounts receivable (Note 13.e).

d) Cost of well’s development

Through one of its subsidiaries, UNNA ENERGIA S.A., the Corporation operates and extracts oil from two fields (Lot I and Lot V) located in the province of Talara, in northern Peru. Both fields are operated under long-term service contracts in which the Corporation provides hydrocarbon extraction services to Perupetro. The expiration date of these contracts are December 2021 and October 2023 for Lot I and Lot V, respectively.

On December 10, 2014, the Peruvian State granted the subsidiary UNNA ENERGIA S.A. the right to exploit for 30 years the oil lots III and IV (owned by the Peruvian State - Perupetro) located in the Talara basin, Piura. The investment committed is estimated at US$400 million and corresponds to the drilling of 230 wells in Lot III and 330 wells in Lot IV. The drilling began in April 2015 in both lots.

As part of the Corporation’s obligations under the infrastructure, it is necessary to incur certain costs to prepare the wells located in Lots I, III, IV and V. These costs are capitalized as part of the intangible assets with a value of S/41 million during 2020 (S/108 million in 2019 and S/68 million in 2018), which includes the capitalization of the provision for dismantling wells and instalations in Lots I, III, IV and V, which during 2020 has not had a significant movement (S/36 million during 2019).

The lots are amortized on the basis of the useful lives of the wells (determined on the remaining terms for lots I and V and units produced for lots III and IV), until the term of contract with Perupetro.

e) Amortization of intangible assets

Amortization of intangibles is broken down in the consolidated income statement as follows:

	2018		2019		2020
Cost of sales and services (Note 26)		101,378		101,810		94,483
Administrative expenses (Note 26)		7,293		5,689		4,138
(+) Amortization discontinued operations		3,401		—		—
		112,072		107,499		98,621