HSBC 2007 Annual Report Download - page 412

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
Note 22
410
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.
It is HSBC’s policy to retest goodwill when there are indications that conditions have changed since the last goodwill
impairment test such that a different outcome may result. During the fourth quarter of 2007, the Personal Financial
Services – North America CGU experienced deterioration in economic and credit conditions, and carried out
restructuring in certain operations. As a result, goodwill impairment was retested as at 31 December 2007. This
testing confirmed that, notwithstanding the effects of the above factors, goodwill for the CGU as a whole remained
unimpaired.
The following CGUs include in their carrying value goodwill that is a significant proportion of total goodwill
reported by HSBC. These CGUs do not carry on their balance sheets any intangible assets with indefinite useful
lives, other than goodwill.
2007 2006
Cash-generating unit
Goodwill at
1 July
2007
Discount
rate
Nominal
growth rate
beyond
initial
cash flow
projections
Goodwill at
1 July
2006
Discount
rate
Nominal
growth rate
beyond
initial
cash flow
projections
US$m % % US$m % %
Personal Financial Services – Europe ................ 4,197 10.3 5.2 4,149 10.6 5.0
Commercial Banking – Europe .......................... 3,045 10.1 4.6 2,948 10.2 4.5
Private Banking – Europe ................................... 4,694 10.0 3.8 4,417 10.0 4.2
Global Banking and Markets – Europe .............. 3,894 10.1 4.4 3,792 8.2 4.5
Personal Financial Services – North America .... 10,160 12.3 4.0 10,169 10.0 5.8
Personal Financial Services – Latin America ..... 2,781 16.4 7.8 1,753 16.0 8.2
Total goodwill in the CGUs listed above ........... 28,771 27,228
At 1 July 2007, aggregate goodwill of US$4,254 million had been allocated to CGUs that were not considered
individually significant. These CGUs do not carry on their balance sheets any intangible assets with indefinite useful
lives, other than goodwill.
The present value of in-force long-term insurance business
Movement on the PVIF
2007 2006
US$m US$m
At 1 January ....................................................................................................................................... 1,549 1,400
Addition from current year new business ......................................................................................... 380 254
Acquisition of subsidiaries or portfolios ........................................................................................... 390 –
Movement from in-force business (including investment return variances and changes in
investment assumptions) .............................................................................................................. (204) (203)
Exchange differences and other movements ..................................................................................... (150) 98
At 31 December ................................................................................................................................. 1,965 1,549
PVIF-specific assumptions
The key assumptions used in the computation of PVIF for HSBC’s main life insurance operations were:
2007 2006
UK Hong Kong France1 UK Hong Kong
% % % % %
Risk free rate .................................. 4.30 3.51 4.26 4.30 3.73
Risk discount rate .......................... 8.00 11.00 8.00 8.00 11.00
Expenses inflation ......................... 3.40 3.00 2.00 3.40 3.00
1 HSBC acquired HSBC Assurances in March 2007.