IAS 38

Since its founding, Westwing has invested and further developed software to support its growing
internal and external business requirements. To maintain its software architecture, Westwing has
established a in-house technology team that provides central support to all countries. An important
development was the expansion of the technological landscape to address the increasing focus on
mobile platforms. Westwing provides app for IOS and Android devices as well as smartphone and tablet-
optimized sites.

Development costs are capitalized in line with IAS 38. During the 2020 fiscal year, Westwing’s net book
value of intangible assets resulting from capitalization of internally developed software increased by
EUR 2.2m to a total of EUR 13.8m. The share of capitalized development costs as percent of total
technology costs was about 30% in 2020 (2019: 43%). Amortization of capitalized development costs
amounted to EUR 2.8m in 2020 (2019: EUR 1.9).

Cash flow

Cash outflow from investing activities amounted to EUR- 8.0 (2019: EUR -8.8), which included
investments in intangible assets of EUR 5.4 in 2020, especially in internally developed software.

Non-current assets mainly consist of PPE as well as intangible assets. Intangible assets, primarily
representing capitalization of software development, increased by EUR 2.2m. Capitalization of software
development of EUR 5.3m was partially offset amortization of EUR 3.0m and an impairment charge of
EUR 0.2m in 2020.

Financial position

In fiscal year 2020, intangible assets consisted of both purchased and internally developed software. In
2020, the net book value increased by EUR2.2m to EUR 14.0m (December 31, 2019: EUR
11.8m) due to the capitalization of software development of EUR 5.3m that was partially offset
by amortization of EUR 2.8m and an impairment charge of EUR 0.2m.

2.9 Intangible Assets

2.9.1 P U R C H A S E D T R A D E M A R K S , B R A N D S , L I C E N S E S A N D S O F T WA R E

Separately acquired trademarks, brands, software and licenses have a finite useful life and are shown at
cost less accumulated amortization and impairment losses.

Acquired computer software licenses, domains, trademarks and brands are capitalized based on the
costs incurred to acquire them and bring them to use, including cost for further development of
software for which licenses have been acquired.

Furthermore, intangible assets also include prepayments on items that are classified as intangible
assets. Such amounts are not subject to amortization.

2.9.2 I N T E R N A L LY G E N E R AT E D S O F T WA R E

Research and development costs are expensed as incurred, except for development costs which must be
capitalized when certain conditions are met.
Development costs that are directly attributable to the design, testing and implementation of
identifiable and unique software products controlled by the Company (such as warehouse and logistics
applications, mobile app projects as well as the development of own software in the area of consumer
apps and payment methods, among others) are recognized as intangible assets when the following
criteria are met:

• It is technically feasible to complete the software product so that it will be available for use;

• management intends to complete the software product and use or sell it;

• there is an ability to use or sell the software product;

• it can be demonstrated how the software product will generate probable future economic benefits;

• adequate technical, financial and other resources to complete the development and to use or sell the
software product are available; and

• the expenditure attributable to the software product during its development can be reliably
measured.

Directly attributable costs that are capitalized as part of software products include employee-related
expenses and costs incurred for external services needed to develop the software. Other development
expenditures that do not meet these criteria are recognized as expenses as incurred. Development costs
previously recognized as expenses are not recognized as an asset in a subsequent period.

2.9.3 AMORTIZATION

Amortization is calculated using the straight-line method to allocate the cost of trademarks, brands,
software, and licenses over their estimated useful lives:

Asset Useful life in years

Internally generated software 3 to 5

Acquired software and licenses 2 to 5

Trademarks (licenses) 15 years or the term of the trademark agreement (if shorter)

13. INTANGIBLE ASSETS The intangible assets employed by the business are set out below: EUR m
Software and licenses Trademarks Internally generated intangibles Intangibles under development Total
Cost as of January 1, 2019 0.7 0.3 13.7 0.0 14.8 Additions 0.1 – 0.0 6.0 6.2 Transfers – – 5.4 –5.4 –
Disposals – – – – – Cost as of December 31, 2019 0.9 0.3 19.2 0.6 21.0 Accumulated amortization as of
January 1, 2019 0.6 0.1 6.1 0.0 6.7 Amortization charge 0.1 0.0 1.9 – 2.0 Impairment charge – – 0.3 – 0.3
Accumulated amortization as of December 31, 2019 0.7 0.2 8.3 0.0 9.1 Carrying amount as of December
31, 2019 0.2 0.1 10.9 0.6 11.9 EUR m Software and licenses Trademarks Internally generated intangibles
Intangibles under development Total Cost as of January 1, 2020 0.9 0.3 19.2 0.6 21.0 Additions 0.1 – 0.0
5.3 5.4 Transfers – – 3.1 –3.1 – Disposals –0.0 – – – –0.0 Cost as of December 31, 2020 1.0 0.3 22.3 2.8
26.4 Accumulated amortization as of January 1, 2020 0.7 0.2 8.3 0.0 9.1 Amortization charge 0.1 0.0 2.8
– 3.0 Impairment charge – – 0.2 – 0.2 Disposals –0.0 – – – –0.0 Accumulated amortization as of
December 31, 2020 0.8 0.2 11.3 0.0 12.3 Carrying amount as of December 31, 2020 0.2 0.1 11.0 2.8 14.1
Additions to internally generated intangibles and intangibles under development of EUR 5.3m (2019:
EUR 6.1m) largely comprise of development costs in respect to warehouse and logistics applications,
mobile app projects as well as the development of own software in the area of consumer apps, payment
methods and significant improvement of stability, speed and security. The development projects have
been separated into identifiable project phases, characterized by the development of new
functionalities. Upon the completion of distinguished phases and roll-out of a functionality, the related
costs are transferred from intangibles under development into internally generated intangibles, at
which point amortization over the useful life of three to five years commences. The aggregate amount
of research and development expenditure recognized as an expense during the year was EUR 10.4m
(2019: EUR 7.7m).

Amortization of intangible assets is fully recorded in general and administration expenses. In 2020, some
projects regarding internal tools had to be impaired by EUR 0.2m, as they have not been as valuable as
originally expected (2019: EUR 0.3m). An impairment test for intangible assets under development was
performed that did not revealed need for impairment.

Text

I would start with the point why IAS 38 is important to Westwing. First of all, IAS 38 sets out the criteria
for recognizing and measuring intangible assets and requires disclosures about them. In the case of the
Westwing, they invest and further develop software to support its growing internal and external
business requirements. To maintain its software architecture, Westwing has established a in-house
technology team that provides central support to all countries. An important development was the
expansion of the technological landscape to address the increasing focus on mobile platforms. Westwing
provides app for IOS and Android devices as well as smartphone and tablet-optimized sites.

Software development is connected to development costs.

Research and development costs are expensed as incurred, except for development costs which must be
capitalized when certain conditions are met.

Development costs that are directly attributable to the design, testing and implementation of
identifiable and unique software products controlled by the Company (such as warehouse and logistics
applications, mobile app projects as well as the development of own software in the area of consumer
apps and payment methods, among others) are recognized as intangible assets when the recognition
criteria are met.

Directly attributable costs that are capitalized as part of software products include employee-related
expenses and costs incurred for external services needed to develop the software. Other development
expenditures that do not meet these criteria are recognized as expenses as incurred. Development costs
previously recognized as expenses are not recognized as an asset in a subsequent period.

On the slide you can see the table which describes the main changes in intangible assets during 2 past
years.

I will start with acquired intangible assets.

Separately acquired trademarks, brands, software and licenses have a finite useful life and are shown at
cost less accumulated amortization and impairment losses. At 31 st of December 2020 the carrying value
of software and licenses amounts to 0,2Mio.

Acquired computer software licenses, domains, trademarks and brands are capitalized based on the
costs incurred to acquire them and bring them to use, including cost for further development of
software for which licenses have been acquired.

Let´s move to the internally generated intangibles.

Additions to internally generated intangibles and intangibles under development of EUR 5.3m (2019:
EUR 6.1m) largely comprise of development costs in respect to warehouse and logistics applications,
mobile app projects as well as the development of own software in the area of consumer apps, payment
methods and significant improvement of stability, speed and security. The development projects have
been separated into identifiable project phases, characterized by the development of new
functionalities. Upon the completion of distinguished phases and roll-out of a functionality, the related
costs are transferred from intangibles under development into internally generated intangibles. The
aggregate amount of research and development expenditure recognized as an expense during the year
was EUR 10.4m (2019: EUR 7.7m).

Amortization of intangible assets is fully recorded in general and administration expenses. In 2020, some
projects regarding internal tools had to be impaired by EUR 0.2m, as they have not been as valuable as
originally expected (2019: EUR 0.3m). An impairment test for intangible assets under development was
performed that did not revealed need for impairment.

On this slide you can see some notes.

Amortization is calculated using the straight-line method to allocate the cost of trademarks, brands,
software, and licenses over their estimated useful lives:

Asset Useful life in years

Internally generated software 3 to 5

Acquired software and licenses 2 to 5

Trademarks about 15 years

In fiscal year 2020, intangible assets consisted of both purchased and internally developed software. In
2020, the net book value increased by EUR2.2m to EUR 14.0m (December 31, 2019: EUR 11.8m) due to
the capitalization of software development of EUR 5.3m that was partially offset by amortization of EUR
2.8m and an impairment charge of EUR 0.2m.

Cash outflow from investing activities amounted to EUR- 8.0M, the main part of it is attributed to the
investments in intangible assets of EUR 5.4 in 2020, especially in internally developed software.