5.7 DESCRIPCIÓN DE LA PROPUESTA
5.7.4 Lineamiento para evaluar la propuesta
The group The bank
2012 2011 2012 2011
£m £m £m £m
Goodwill ... 6,399 9,629 298 298
Present value of in-force long-term assurance business (‘PVIF’) 705 708 – –
Other intangible assets ... 722 658 581 501
7,826 10,995 879 799
Goodwill
The group
2012 2011
£m £m
Gross amount and Carrying amount
At 1 January ... 9,629 9,860 Disposals ... (3,000) (3) Exchange differences ... (230) (228) At 31 December ... 6,399 9,629 The bank 2012 2011
Notes on the Financial Statements
(continued)rate in the country concerned and a premium or discount to reflect the inherent risk of the business being evaluated. These variables are established on the basis of management judgement and current market assessments of economic variables.
The review of goodwill impairment represents management’s best estimates of the factors set out in Note 3. These values are sensitive to the cash flows projected for the periods for which detailed forecasts are available, and to assumptions regarding the long-term sustainable pattern of cash flows thereafter. While the acceptable range within which underlying assumptions can be applied is governed by the requirement for resulting forecasts to be compared with actual performance and verifiable economic data in future years, the cash flow forecasts necessarily and appropriately reflect management’s view of future business prospects. The process of identifying and evaluating goodwill impairment is inherently uncertain because it requires significant management judgement in making a series of estimations, the results of which are highly sensitive to the assumptions used.
The following CGUs, include in their carrying value goodwill that is a significant proportion of total goodwill reported by the group at 31 December 2012. These CGUs do not carry on their balance sheet any intangible assets with indefinite useful lives, other than goodwill.
Goodwill at
1 July 2012 Discount rate
Nominal growth rate beyond initial cash flow projections Goodwill at 1 July 2011 Discount rate Nominal growth rate beyond initial cash flow projections £m % % £m % %
Global Banking and Markets ... 5,292 10% 3.6% 5,915 10% 4.4%
Continental Europe Retail ... 818 10% 3.5% 890 10% 4.3%
Total goodwill in the CGUs listed above ... 6,110 6,805
The group’s transfer of HSBC Private Banking Holdings (Suisse) SA to HSBC Holdings plc on 1 November 2012 led to the disposal of goodwill on consolidation which, at 1 July 2012, amounted to £2,912 million. This goodwill related predominantly to the Group Private Banking CGU. Additionally, as at 1 July 2012, aggregate goodwill of £344 million (1 July 2011: £345 million) had been allocated to other CGUs that were not considered individually significant. These CGUs do not carry on their balance sheets any significant intangible assets with indefinite useful lives other than goodwill.
Nominal long-term growth rate: external data that reflects the market’s assessment of GDP and inflation for the countries within which the CGU operates. The rates used for 2011 and 2012 do not exceed the long-term growth rate for the countries within which the CGU operates.
Discount rate: the after tax discount rate used to discount the cash flows is based on the cost of capital assigned to each CGU, which is derived using a Capital Asset Pricing Model (‘CAPM’). The CAPM depends on inputs reflecting a number of financial and economic variables including the risk-free rate in the country concerned and a premium to reflect the inherent risk of the business being evaluated. These variables are based on the market’s assessment of the economic variables and management’s judgement. In addition, for the purposes of testing goodwill for impairment, management supplements this process by comparing the discount rates derived using the internally-generated CAPM with cost of capital rates produced by external sources. The group uses externally-sourced cost of capital rates where, in management’s judgement, these rates reflect more accurately the current market and economic conditions. For 2012 and 2011, internal costs of capital rates were consistent with externally-sourced rates.
The present value of in-force long-term assurance business Movement in PVIF
The group’s life insurance business is accounted for using the embedded value approach which, inter alia, provides a comprehensive risk and valuation framework. The PVIF asset represents the present value of the shareholders’ interest in the profits expected to emerge from the book of in-force policies.
The calculation of PVIF is based upon assumptions that take into account risk and uncertainty. To project these cash flows, a variety of assumptions regarding future experience is made by each insurance operation which reflects local market conditions and management’s judgement of local future trends.
PVIF-specific assumptions
The key assumptions used in the computation of PVIF for the group’s main life insurance operations were:
2012 2011
France UK Life France UK Life
Risk free rate ... 2.12% 1.53% 2.77% 2.24% Risk discount rate ... 4.05% 2.03% 5.95% 2.74% Expenses inflation ... 2.00% 2.84% 2.00% 3.45% The calculation of the PVIF is based upon assumptions that take into account risk and uncertainty. To project these
cash flows, a variety of assumptions regarding future experience is made by each insurance operation which reflects local market conditions and management’s judgement of local future trends.
The following table shows the effect on the PVIF of reasonably possible changes in the main economic assumption, risk-free rates, across all insurance manufacturing subsidiaries.
Sensitivity of PVIF to changes in economic assumptions
PVIF at 31 December
2012 2011
£m £m
+ 100 basis points shift in risk-free rate ... 1 (16) – 100 basis points shift in risk-free rate ... (28) 5 + 100 basis points shift in risk discount rate ... (17) (15) – 100 basis points shift in risk discount rate ... 20 19 Due to certain characteristics of the contracts, the relationships may be non-linear and the results of the sensitivity- testing should not be extrapolated to higher levels of stress. In calculating the scenario, the shift in the risk-free rate results in changes to investment returns, risk discount rates and bonus rates which are incorporated. The sensitivities shown are before actions that could be taken by management to mitigate impacts and before resultant changes in policyholder behaviour.
Non-economic assumptions
The group determines the policyholder liabilities for non-life manufacturers by reference to non-economic assumptions including claims costs and expense rates.
Notes on the Financial Statements
(continued)Sensitivity to changes in non-economic assumptions
Effect on profit for the year to 31 December
Effect on total equity at 31 December
2012 2011 2012 2011
£m £m £m £m
20% increase in claims costs ... – (4) – (4) 20% decrease in claims costs ... – 4 – 4
10% increase in mortality and/or morbidity rates ... (19) (19) (19) (19)
10% decrease in mortality and/or morbidity rates ... 19 17 19 17
50% increase in lapse rates ... (157) (142) (157) (142) 50% decrease in lapse rates ... 260 234 260 234 10% increase in expense rates ... (30) (27) (30) (27) 10% decrease in expense rates ... 30 27 30 27
Other intangible assets
The analysis of the movement of other intangible assets was as follows: The group Trade Names Internally generated software Purchased Software Customer/ merchant
relationships Other Total
£m £m £m £m £m £m
Cost
At 1 January 2012 ... 13 1,466 156 208 3 1,846
Additions1 ... 1 201 9 18 – 229
Disposals ... – (5) (6) – – (11)
Amounts written off ... – (365) (1) (2) – (368)
Exchange differences ... – (3) (4) – – (7)
Other changes ... – 4 7 (4) – 7
At 31 December 2012 ... 14 1,298 161 220 3 1,696
Accumulated amortisation and impairment
At 1 January 2012 ... (12) (932) (112) (131) (1) (1,188)
Amortisation charge for the year2 ... (2) (144) (15) (12) – (173)
Impairment charge for the year2 ... – (1) (1) – – (2)
Disposals ... – 4 2 – – 6
Amounts written off ... – 365 1 2 – 368
Exchange differences ... – 3 3 – – 6
Other changes ... – 8 (2) 2 1 9
At 31 December 2012 ... (14) (697) (124) (139) – (974)
Net carrying amount at 31 December 2012 – 601 37 81 3 722
Cost
At 1 January 2011 ... 16 1,247 161 207 3 1,634
Additions1 ... – 261 19 1 – 281
Disposals ... – – (5) – – (5)
Amounts written off ... – (30) (6) – – (36)
Exchange differences ... (3) (5) (5) – – (13)
Other changes ... – (7) (8) – – (15)
At 31 December 2011 ... 13 1,466 156 208 3 1,846
Accumulated amortisation and impairment
At 1 January 2011 ... (13) (823) (111) (114) – (1,061)
Amortisation charge for the year2 ... (1) (123) (16) (17) (1) (158)
The bank
Internally generated
software Other Total £m £m £m Cost
At 1 January 2012 ... 1,274 5 1,279
Additions1 ... 184 17 201
Disposals ... – (3) (3)
Amounts written off ... (365) – (365)
Other changes ... 10 5 15 At 31 December 2012 ... 1,103 24 1,127 Accumulated amortisation and impairment
At 1 January 2012 ... (777) (1) (778)
Amortisation charge for the year2 ... (133) (1) (134)
Impairment charge for the year2 ... (1) – (1)
Amounts written off ... 365 – 365
Other changes ... 2 – 2 At 31 December 2012 ... (544) (2) (546)
Net carrying amount at 31 December 2012 ... 559 22 581
Cost
At 1 January 2011 ... 1,059 6 1,065 Additions1 ... 242 3 245
Disposals ... – (4) (4) Amounts written off ... (27) – (27)
At 31 December 2011 ... 1,274 5 1,279 At 1 January 2011 ... (672) (5) (677)
Amortisation charge for the year2 ... (112) – (112)
Impairment charge for the year2 ... (20) – (20)
Disposals ... – 4 4 Amounts written off ... 27 – 27 At 31 December 2011 ... (777) (1) (778)
Net carrying amount at 31 December 2011 ... 497 4 501
1 At 31 December 2012, the bank did not have any contractual commitments to acquire intangible assets (2011: nil). 2 The amortisation and impairment charges for the year are recognised within the income statement under ‘Amortisation and