Aviva 2009 Annual Report Download - page 179

177
Performance review
Aviva plc Notes to the consolidated financial statements continued
Corporate responsibility
Annual Report and Accounts 2009
Governance
Shareholder information
Financial statements IFRS
Financial statements MCEV
Other information
16 – Goodwill continued
(b) Goodwill allocation and impairment testing
A summary of the goodwill and intangibles with indefinite useful lives allocated to cash-generating units is presented below.
Carrying amount of intangibles
with indefinite useful lives
Carrying amount of goodwill (detailed in note 17) Total
2009 2008 2007 2009 2008 2007 2009 2008 2007
£m £m £m £m £m £m £m £m £m
United Kingdom
Long-term business (see (i) below) 31 52 71 — — — 31 52 71
General insurance, RAC and health (see (ii) below) 1,208 1,208 1,276 201 201 221 1,409 1,409 1,497
Europe
France (long-term business) (see (iii) below) — — — 55 60 45 55 60 45
Ireland
Long-term business (see (iv) below) 122 133 101 — — — 122 133 101
General insurance and health (see (v) below) 121 134 81 — — — 121 134 81
Italy
Long-term business (see (vi) below) 65 74 46 — 334 254 65 408 300
General insurance and health (see (vii) below) 58 64 42 — 137 132 58 201 174
Delta Lloyd (see (viii) below) 319 279 212 — — — 319 279 212
Spain (long-term business) (see (ix) below) 580 652 552 — — — 580 652 552
Other 15 24 19 — — — 15 24 19
North America
United States (long-term business) (see (x) below) 770 865 624 — — — 770 865 624
Canada 42 43 17 — — — 42 43 17
Asia Pacific
Various 50 55 41 — — — 50 55 41
3,381 3,583 3,082 256 732 652 3,637 4,315 3,734
As explained in accounting policy N, the carrying amount of goodwill and intangible assets with indefinite useful lives is reviewed
at least annually or when circumstances or events indicate there may be uncertainty over this value. The tests led to impairment of
goodwill of £nil in 2009
(2008: £68 million) .
Goodwill and intangibles with indefinite useful lives have been tested for impairment in these businesses as follows:
United Kingdom
(i) Long-term business
The United Kingdom long-term business goodwill balance is split across four cash generating units, with no individual balance
exceeding £22 million.
The Group acquired Hamilton Life Assurance Company Limited from HFC Bank Limited (HFC) in 2007, and identified
£20 million of the purchase price as goodwill in respect of unrecognised deferred tax assets which could not be utilised or
recognised at the time. The Group is now able to recognise value for these assets and further consideration of £9 million, included
in the "Movements in contingent consideration", is payable to HFC in this respect. As required by paragraph 65 of IFRS 3, Business
Combinations, the total £29 million has been charged to expenses, together with £1 million of transaction costs representing the
balance of acquired goodwill. Deferred tax assets have increased to recognise this new asset (see note 45(b)(iii)).
(ii) General insurance, RAC and health
The recoverable amount of the UK general insurance, RAC and health unit has been determined based on a value in use
calculation. The calculation uses cash flow projections based on business plans approved by management covering a three year
period and a risk adjusted discount rate of 9.5%. Cash flows beyond that three year period have been extrapolated using a steady
2.5% growth rate. This growth rate is set with regards to past experience and historical statistics of UK premium growth published
by the Association of British Insurers.
Key assumptions used for the calculation were:
— Budgeted operating profit represents the operating profit in the business plans, approved by management, and as such
reflects the best estimate of future profits based on both historical experience and expected growth rates for the relevant
UK industry sectors
— Some of the assumptions that underline the budgeted operating profit include market share, customer numbers, premium rate
and fee income changes, claims inflation and commission rates; and
— Growth rates represent the rates used to extrapolate future cash flows beyond the business plan period and have been based
upon latest information available regarding future and past growth rates, including external sources of data such as ABI Annual
Market Statistics.
Financial statements IFRS