NOTE 6. INVESTMENTS IN ASSOCIATES
|% Ownership December 31,|
|Levitech BV||Almere, the Netherlands||24.0%||24.0%|
|ASM Pacific Technology Ltd 1||Kwai Chung, Hong Kong, People’s Republic of China||39.55%||39.19%|
- This shareholding diluted in December 2016 as a result of the issuance of shares to 39.19%.
The changes in the investment and associates are as follows:
|Levitech 1||Net equity share||Other (in)tangible assets||Goodwill||Total ASMPT||Total|
|Balance January 1, 2015||–||346,563||158,844||587,541||1,092,948||1,092,948|
|Increase of interest||900||–||–||–||–||900|
|Share in net earnings of investments in associates||–||44,158||–||–||44,158||44,158|
|Other comprehensive income of investments in associates||–||567||–||–||567||567|
|Amortization recognized (in)tangible assets||–||–||(27,151)||–||(27,151)||(27,151)|
|Value reduction as resulting from start-up costs||(900)||–||–||–||–||(900)|
|Dilution ASMPT share to 39.55%||–||5,535||–||–||5,535||5,535|
|Foreign currency translation effect||–||21,214||18,169||68,264||107,647||107,647|
|Balance December 31, 2015||–||375,172||149,862||655,805||1,180,839||1,180,839|
|Share in net earnings of investments in associates||–||67,711||–||–||67,711||67,711|
|Other comprehensive income of investments in associates||–||(1,344)||–||–||(1,344)||(1,344)|
|Amortization recognized (in)tangible assets||–||–||(27,223)||–||(27,223)||(27,223)|
|Dilution ASMPT share to 39.19%||–||9,336||–||–||9,336||9,336|
|Foreign currency translation effect||–||3,740||3,724||21,038||28,502||28,502|
|Balance December 31, 2016||–||432,532||126,363||676,843||1,235,738||1,235,738|
- Reflects the net equity value of the interest in Levitech BV resulting from the management buy-out in 2009 of the RTP business. ASM International NV obtained a 20% interest in Levitech BV. In 2015 ASMI increased its interest to 24%.The value has been reduced in 2015 due to (start-up) losses of Levitech caused by the introduction of their advanced products in the market.
On March 15, 2013, the Company divested a controlling stake in its subsidiary ASM Pacific Technology Ltd (ASMPT). After the initial accounting of the sale transaction and related gains, future income from ASMPT was adjusted for the fair value adjustments arising from the basis differences as if a business combination had occurred under IFRS 3R, Business Combinations, i.e. a purchase price allocation (PPA).
The purchase of the associate has been recognized at fair value, being the value of the ASMPT shares on the day of closing of the purchase transaction. The composition of this fair value was determined through a PPA. The PPA resulted in the recognition of intangible assets for customer relationship, technology, trade name, product names and goodwill. For inventories and property, plant & equipment, a fair value adjustment was recognized.
The ASMPT investment is accounted for under the equity method on a go-forward basis. Equity method investments are tested for prolonged impairment. An investment is considered impaired if the fair value of the investment is less than its carrying value.
If the fair value of an investment is less than its carrying value at the balance sheet date, the Company determines whether the impairment is temporary or prolonged. The amount per share recognized as per December 31, 2016 under equity accounting amounts to HKD63.14, whereas the level 1 fair value per share (being the market price of a share on the Hong Kong Stock Exchange) was HKD82.15 as per December 31, 2016. Management concluded that based on quantitative analysis no impairment of its share in ASMPT existed as per December 31, 2016.
In June 2016,1,575,133 common shares of ASMPT (par value of HKD0.10 per share) were issued as a consequence of the conversion of HKD 150 million of debt. The shares issued have diluted ASMI’s ownership in ASMPT to 39.40% as of June 30, 2016.
In December 2016, 2,139,100 common shares of ASMPT were issued, for cash at par value of HK$0.10 per share, pursuant to the Employee Share Incentive Scheme of ASMPT. The shares issued under the plan in 2016 have diluted ASMI's ownership in ASMPT further to 39.19% as of December 31, 2016.
At December 31, 2016, the book value of our equity method investment in ASMPT was €1,236 million. The historical cost basis of our 39.19% share of net assets on the books of ASMPT under IFRS was €433 million as of December 31, 2016, resulting in a basis difference of €803 million. €126 million of this basis difference has been allocated to property, plant and equipment, and intangibles assets. The remaining amount was allocated to equity method goodwill. Each individual, identifiable asset will periodically be reviewed for any indicators of potential impairment. We amortize the basis differences allocated to the assets on a straight-line basis, and include the impact within the results of our equity method investments. Amortization and depreciation are adjusted for related deferred tax impacts. Included in net income attributable to ASMI for 2016 was after-tax expense of €27 million, representing the depreciation and amortization of the basis differences.
The market value of our 39.19% investment in ASMPT at December 31, 2016 approximates €1,608 million.
Summarized 100% earnings information for ASMPT equity method investment excluding basis adjustments (foreign currency exchange rate average 2016 1 HKD: €0.11698, for December 31, 2015: 1 HKD: €0.11602).
|Income before income tax||1,363||1,793|
|Other comprehensive income||(384)||(237)|
|Total comprehensive income||569||1,201|
Summarized 100% statement of financial position information for ASMPT equity method investment excluding basis adjustments (foreign currency exchange rate per December 31, 2016 was 1 HKD: €0.12232 for December 31, 2015: 1 HKD: €0.11852).
Equity of ASMPT per December 31, 2016 translated into euros at a rate of 0.12232 was €1,104 million (our 39.19% share: €433 million).
The ASMPT Board is responsible for ongoing monitoring of the performance of the Back-end activities. The actual results of the Back-end operating unit are discussed with the ASMPT Audit Committee, which includes the representative of ASMI. The ASMI representative reports to the ASMI Management Board and the Audit Committee of ASMI on a quarterly basis.
Our share of income taxes incurred directly by the associates is reported in result from investments in associates and as such is not included in income taxes in our Consolidated financial statements.