CSL Ltd Annual Report 2020

CSL Limited Annual Report 2020 105 Note 1: Segment Information and Business Combinations continued Inter-segment sales Inter-segment sales are carried out on an arm’s length basis and reflect current market prices. Geographical areas of operation The Group operates predominantly in Australia, the USA, Germany, the United Kingdom, Switzerland and China. The rest of the Group’s operations are spread across many countries and are collectively disclosed as ‘Rest of World’. Geographic areas Australia US$m United States US$m Germany US$m UK US$m Switzerland US$m China US$m Rest of world US$m Total US$m 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 External Operating Revenue 752.3 702.2 4,598.2 3,973.9 825.9 763.9 478.2 510.4 285.8 216.0 215.3 625.8 1,995.1 1,746.4 9,150.8 8,538.6 PPE, ROU, and intangible assets 1,063.9 840.0 3,011.2* 2,159.5 936.8 737.1 362.2 333.0 2,298.1 1,804.0 477.0* 472.3 296.4 16.7 8445.6 6,362.6 Note 1b: Business Combination Vitaeris acquisition On 8 June 2020 CSL acquired 100% of the equity of Vitaeris Inc. for an upfront payment of $20m and a series of contingent payments subject to the achievement of development milestones. Vitaeris has developed clazakizumab, a potential treatment of chronic active antibody-mediated rejection, the leading cause of long-term rejection in kidney transplant recipients. CSL had entered into a strategic collaboration with Vitaeris in 2017, one of the main drivers behind the acquisition was to be in a position to exercise greater control over the R&D program than was possible under the collaboration. CSL acquired control of Vitaeris through the acquisition of 100% of its share capital. The provisional fair value of assets and liabilities acquired were: Asset Class $m Cash 2.2 Trade and other receivables 0.1 Prepaid expenses 3.0 Intellectual property 188.0 Goodwill 52.6 Trade payables & other (8.8) Other liabilities (3.5) Deferred tax liabilities (52.6) Fair Value of Net Assets Acquired 181.0 Consideration paid 20.0 Contingent consideration recognised as a liability at the date of acquisition 161.0 The liability recognised at the date of acquisition has been calculated by reference to our judgement of the expected probability and timing of the contingent consideration, based upon level 3 inputs under the fair value hierarchy, which is then discounted to a present value using an appropriate discount rate. The liability is included in the other non-current liabilities amount on the balance sheet. The range of undiscounted contingent consideration is expected to be between $0, in the event no product receives regulatory approval, and $470m. The outcome is dependent on the technical success of the research program and the commercial success of any resultant product. At this stage of development these factors are unknown and judgement has been exercised in the determination of the fair value of the contingent consideration. The goodwill recognised is a consequence of the recognition of deferred tax liabilities in respect of indefinite lived intellectual property in accordance with accounting standards. Since CSL obtained control of the acquired business it has incurred $0.8m of R&D expenses as a result of the ongoing research activity. * This number has been corrected from that published on 19 August 2020.