HSBC 2012 Annual Report Download - page 467

465
Overview
Operating & Financial Review
Corporate Governance
Financial Statements
Shareholder Information
determined that a reasonably possible change in any of the key assumptions described above would not cause an
impairment to be recognised in respect of RBWM – Europe or CMB – Europe.
Global Private Banking – Europe: the revenues in GPB – Europe are predominately generated through HSBC’s
client relationships. The cash flow forecast reflects current economic conditions and key assumptions include the
level of interest rates and client risk appetite. Further economic deterioration could result in a decrease in assets under
management and a reduction in fee and trading income through increased client risk aversion. Based on the
conditions at the balance sheet date, management determined that a reasonably possible change in any of the key
assumptions described above would not cause an impairment to be recognised in respect of GPB – Europe.
Global Banking and Markets – Europe: the key assumption included in the cash flow projection for GB&M – Europe
is that European markets will continue to recover during 2013. Accordingly, European revenues are forecast to
recover in 2013 and this recovery is assumed to continue over the projection period into 2014. Our ability to achieve
the forecast cash flows for GB&M – Europe could be adversely impacted by regulatory change during the forecast
period including but not limited to the extent that the recommendations set out in the Final Report by the Independent
Commission on Banking are implemented.
Based on management’s value in use calculation, GB&M – Europe has an excess of recoverable amount over
carrying amount (‘headroom’) of US$2.3bn as at 1 July 2012. Headroom was US$2.3bn as at 31 December 2012
based on goodwill at that point of US$3.1bn. The change in carrying value between 1 July 2012 and 31 December
2012 arises from retranslating goodwill into the presentation currency of the group. The same assumptions were used
in the impairment tests as at 1 July 2012 and 31 December 2012. The following changes to the key assumptions used
in the value in use calculation would be necessary in order to reduce headroom to nil:
Key assumption Change to key assumption to reduce headroom to nil
Discount rate ......................................................................................................... Increase by 64 basis points
Nominal growth rate beyond initial cash flow projection .................................... Decrease by 69 basis points
Revenue compound annual growth rate ............................................................... Decrease from 10.3% to 8.3%
Retail Banking and Wealth Management – Latin America: the assumptions included in the cash flow projections for
RBWM – Latin America reflect the economic environment and financial outlook of the countries within this segment,
with Brazil and Mexico being two of the largest countries included within this segment. Key assumptions include the
growth in lending and deposit volumes and the credit quality of the loan portfolios. Mexico and Panama in particular
are sensitive to economic conditions in the US which could constrain demand. Based on the conditions at the balance
sheet date, management determined that a reasonably possible change in any of the key assumptions described above
would not cause an impairment to be recognised in respect of RBWM – Latin America.
Other intangible assets
Movement of intangible assets excluding goodwill and the PVIF
Trade
names
Mortgage
servicing
rights
Internally
generated
software
Purchased
software
Customer/
merchant
relation-
ships Other Total
US$m US$m US$m US$m US$m US$m US$m
Cost
At 1 January 2012 ................................. 60 591 5,598 856 1,354 454 8,913
Additions1 ............................................. 1 30 765 78 120 48 1,042
Disposals ............................................... – (123) (32) (61) (5) – (221)
Amount written off ............................... – – (680) (21) (39) – (740)
Exchange differences ............................ – – 62 – (48) 12 26
Reclassified to held for sale .................. – – (26) (15) (7) (14) (62)
Other changes ....................................... – – 16 78 (8) 4 90
At 31 December 2012 ........................... 61 498 5,703 915 1,367 504 9,048