HSBC 2008 Annual Report Download - page 411

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22 Goodwill and intangible assets
Goodwill and intangible assets includes goodwill arising on business combinations, the PVIF long-term insurance
business, and other intangible assets.
Goodwill
Reconciliation of goodwill
Europe Hong Kong
Rest of
Asia-
Pacific
North
America
Latin
America Total
US$m US$m US$m US$m US$m US$m
Gross amount
At 1 January 2008 ....................................... 16,744 124 350 12,561 4,474 34,253
Additions ..................................................... 12 – 142 – 1 155
Disposals ..................................................... (415) – – (13) – (428)
Exchange differences .................................. (775) (2) (59) (61) (609) (1,506)
Other changes ............................................. (55) – – – – (55)
At 31 December 2008 ................................. 15,511 122 433 12,487 3,866 32,419
Accumulated impairment losses
At 1 January 2008 ....................................... – – – – – –
Impairment losses ....................................... – – – (10,564) – (10,564)
At 31 December 2008 ................................. – – – (10,564) – (10,564)
Net carrying amount at
31 December 2008 .................................. 15,511 122 433 1,923 3,866 21,855
Gross amount
At 1 January 2007 ....................................... 15,234 124 325 12,527 4,262 32,472
Additions ..................................................... 42 – 6 – 143 191
Disposals ..................................................... (43) – – (12) – (55)
Exchange differences .................................. 1,516 – 19 46 120 1,701
Other changes ............................................. (5) – – – (51) (56)
At 31 December 2007 ................................. 16,744 124 350 12,561 4,474 34,253
Impairment charges recognised
At 31 December 2008, HSBC recognised an impairment charge of US$10,564 million (2007: nil) in respect of
Personal Financial Services – North America. This was a result of the very significant deterioration in the economic
and credit conditions in North America and the resulting further restructuring in the Personal Financial Services –
North America cash generating unit (‘CGU’) in the latter part of 2008. The reduction in the recoverable amount
of the main business lines was driven by higher losses than were expected for 2008, including higher levels of
impairment charges, contraction in new business from lending activities and a delay in the expected return to
profitability of the business. The deterioration in the financial performance was particularly severe in the fourth
quarter of 2008. In addition, the discount rate used increased as observed market discount rates increased for US
consumer finance and banking businesses.
Impairment testing
Timing of impairment testing
HSBC’s impairment test in respect of goodwill allocated to each CGU is performed as at 1 July each year. In line
with the accounting policy set out in Note 2, goodwill is also retested for impairment whenever there is an indication
that goodwill may be impaired. Given the extraordinary market events experienced globally during 2008, HSBC
performed an additional impairment test on all the CGU’s within the Group as at 31 December 2008. For the purpose
of impairment testing, the Group’s CGUs are based on customer groups and global business separated by
geographical region. The CGUs represent the lowest level at which goodwill is monitored by key management
personnel.