HSBC 2009 Annual Report Download - page 437

435
Europe
Hong
Kong
Rest of
Asia-
Pacific1
Middle
East1
North
America
Latin
America Total
US$m US$m US$m US$m US$m US$m US$m
Gross amount
At 1 January 2008 ................................. 16,744 124 281 69 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 ........................... 15,511 122 364 69 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 ............................ 15,511 122 364 69 1,923 3,866 21,855
1 The Middle East is disclosed as a separate geographical region with effect from 1 January 2009. Previously, it formed part of Rest of
Asia-Pacific. Comparative data have been restated accordingly.
During 2009, there was no impairment of goodwill (2008: US$10.6 billion; 2007: nil).
Impairment testing
Timing of impairment testing
HSBC’s impairment test in respect of goodwill allocated to each cash-generating unit (‘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. There was no indication of impairment in the period
to 31 December 2009 and therefore goodwill has not been retested since 1 July 2009. In 2008, an additional
impairment test was performed on all CGUs within the Group as at 31 December due to the extraordinary market
events experienced globally during the year. 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 for internal management purposes.
Basis of the recoverable amount – value in use or fair value less costs to sell
The recoverable amount of all CGUs to which goodwill has been allocated was equal to its value in use (‘VIU’) at
each respective testing date for 2008 and 2009.
For each significant CGU, the VIU is calculated by discounting management’s two year cash flow projections for
each CGU. The discount rate used is based on the cost of capital HSBC allocates to investments in the countries
within which the CGU operates. The long-term growth rate is used to extrapolate the cash flows in perpetuity because
of the long-term perspective within the Group of the business units making up the CGUs. However, due to the current
economic conditions in Personal Financial Services – Latin America, a 10 year cash flow projection was used.