HSBC 2015 Annual Report Download - page 409

HSBC HOLDINGS PLC
407
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Movement analysis of goodwill
Europe Asia MENA
North
America
Latin
America Total
$m $m $m $m $m $m
Gross amount
At 1 January 2015 13,207 1,009 54 7,815 3,007 25,092
Exchange differences (1,237) (73) (4) 4 (300) (1,610)
Reclassified to held for sale1 − − − − (1,319) (1,319)
Other 1 59 (5) (30) (1) 24
At 31 December 2015 11,971 995 45 7,789 1,387 22,187
Accumulated impairment losses
At 1 January 2015 − − − (5,923) − (5,923)
Other − − − 30 − 30
At 31 December 2015 − − − (5,893) − (5,893)
Net carrying amount at 31 December 2015 11,971 995 45 1,896 1,387 16,294
Gross amount
At 1 January 2014 14,977 1,016 55 7,861 3,241 27,150
Disposals (168) − − − − (168)
Exchange differences (1,594) (30) (1) 1 (240) (1,864)
Reclassified to held for sale (8) − − − 24 16
Other −23 −(47) (18) (42)
At 31 December 2014 13,207 1,009 54 7,815 3,007 25,092
Accumulated impairment losses
At 1 January 2014 − − − (5,971) − (5,971)
Exchange differences − − − 1 − 1
Other − − − 47 − 47
At 31 December 2014 − − − (5,923) − (5,923)
Net carrying amount at 31 December 2014 13,207 1,009 54 1,892 3,007 19,169
1 During 2015, $1.3bn of goodwill was reclassified to held for sale following the decision to sell our Brazilian operations. Goodwill was allocated based
on the relative carrying value of the operations in Brazil to the cash generating units in Latin America. See Note 23 for further details.
Impairment testing
HSBC’s impairment test in respect of goodwill allocated to each CGU is performed as at 1 July each year. A review for indicators
of impairment is undertaken at each subsequent quarter end and, as at 31 December 2015, this review identified indicators of
impairment for two CGUs, recognised as sensitive in the annual test performed as at 1 July. As a result, an impairment test has
been performed for Global Private Banking – Europe and Global Banking and Markets – North America as at 31 December
2015 and the goodwill balances, key assumptions and results of this test are included in the disclosures below. For all other
CGUs the annual test performed as at 1 July remains the latest impairment test and the disclosures given are as at 1 July. The
testing at both 1 July and 31 December resulted in no impairment of goodwill.
Basis of the recoverable amount
The recoverable amount of all CGUs to which goodwill has been allocated was equal to its VIU at each respective testing date
for 2014 and 2015.
For each significant CGU, the VIU is calculated by discounting management’s cash flow projections for the 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. For the goodwill impairment test conducted at 1 July 2015, management’s
cash flow projections until the end of 2019 were used. For the goodwill impairment test conducted at 31 December 2015,
management’s cash flow projections until the end of 2020 were used.