12 Other intangible assets

In accordance with IAS 38 Intangible Assets, internally generated intangible assets are recognized only if it is probable that future economic benefits will flow to the entity and the cost of the asset can be measured reliably.

These assets are recognized at acquisition or production cost and depreciated on a straight-line basis over their useful lives. In the case of intangible assets acquired within the scope of a business combination, the acquisition costs correspond to their fair values at the date of acquisition. The major part of amortization is contained in the cost of sales.

Development costs are capitalized if and as soon as all of the criteria set forth in IAS 38.57 are fulfilled. Essentially, fulfillment of these criteria is based on certain milestones in the internal development process. Development costs are recognized at the amount of total expenses incurred.

An agile approach to development is pursued in most digital development projects. In general, no specific milestones can be used as a benchmark for meeting the criteria under IAS 38.57, which is why the criteria are reviewed on an ongoing basis.

If there are no development costs, the expenses are recognized through profit or loss as research costs in the period in which they arise, and are not capitalized retrospectively at a later date.

Carl Zeiss Meditec AG performs development work and sets new technological standards. That is why only a small portion of development costs is capitalized in the Carl Zeiss Meditec Group, as the criteria for recognition as part of the cost of an intangible asset are not all satisfied until a relatively late stage.

The costs directly attributable to development, including appropriate development-related overheads, are recognized as part of the cost of an asset.

The fair values of trademark, patent and technology rights or similar assets, which were acquired within the scope of a business combination, are determined according to the relief from royalty method or the multi-period excess earnings method (MEEM). In the relief from royalty method, an analogy is used, whereby the financial contributions (cash flows) of an intangible asset due to royalties are estimated, which the owner of this asset is then spared from paying, contrary to the alternative of licensing a similar asset with an equivalent use. This involves determining the fictitious royalty payments that would be payable if the respective intangible asset were owned by a third party. In the MEEM method, hypothetical lease payments for so-called supporting assets are deducted from the EBITDA attributable to the asset over its term. These residual cash flows are then condensed to present value, taking taxes into account.

Depreciation is based on the following ranges of useful lives:

Intangible assets not yet ready for use are tested for impairment at least once a year or if there are specific indications of impairment. The recoverable amount of the asset is determined in order to calculate any necessary impairment.

The recoverable amount is the higher of the fair value less costs to sell and the value in use – determined for the individual asset in each case.

In assessing value in use, the estimated future cash flows are discounted to their present value using an after-tax risk-adjusted discount rate based on a discounted cash flow method. For details on calculation of the discount rate and the underlying cash flow planning, see Note 11 “Goodwill”.

The net carrying amount of the capitalized development costs relates to internally developed technologies and devices and includes developments that have not yet been completed in the amount of €142,180k (prior year: €178,580k). The Carl Zeiss Meditec Group completed its annual scheduled impairment testing of intangible assets not yet ready for use as of 30 June 2025. As in the previous year, this testing did not indicate any need for impairment based on the values in use.

The amortization of development costs in the current fiscal year includes write-downs of €4,983k on technologies and developments already in use that were acquired as part of the acquisition of Carl Zeiss Meditec Cataract Technology, Inc. The allowances are recognized in the cost of goods sold in the “Ophthalmology” SBU. The need for impairment resulted from reduced expectations regarding the future earnings contributions of the acquired technologies. The recoverable amount of €4,357k corresponds to the values in use, with the underlying capitalization interest rate largely being based on that of the group of CGUs.