HSBC 2015 Annual Report Download - page 412

Notes on the Financial Statements (continued)
20 – Goodwill and intangible assets
HSBC HOLDINGS PLC
410
The following table presents the sensitivities of the VIU for each sensitive CGU to the reasonably possible adverse changes in
the assumptions set out above:
Sensitivity of VIU to reasonably possible changes in key assumptions
Reasonably possible change in key assumptions and impact on VIU
Carrying
amount
Value
in use
Discount
rate
Impact
on VIU
Cash
flows
Impact on
VIU
Long-term
growth
rate
Impact
on VIU
Cumulative
impact of
all changes
$bn $bn bps $bn %$bn bps $bn $bn
Cash-generating unit
Global Private Banking
– Europe1 4.6 5.2 60 (0.5) (20) (1.0) (76) (0.5) (1.8)
Global Banking and Markets
– Europe2 20.9 27.1 110 (3.9) (20) (5.4) (213) (5.6) (11.9)
Global Banking and Markets
– North America1 13.8 14.8 100 (2.2) (20) (3.0) (215) (3.3) (6.6)
1 As at 31 December 2015.
2 As at 1 July 2015.
The following table presents for each sensitive CGU, the change required to individual current assumptions to reduce
headroom to nil (breakeven).
Changes to current assumptions to achieve nil headroom
Increase/(decrease)
Discount
rate
Cash
flow
Long-term
growth rate
bps % bps
Cash-generating unit
Global Private Banking
–
Europe1 69 (11.2) (86)
Global Banking and Markets
–
Europe2193 (23.0) (245)
Global Banking and Markets
–
North America1 41 (6.7) (50)
1 As at 31 December 2015.
2 As at 1 July 2015.
Intangible assets
Accounting policy
Intangible assets are recognised, and those that are acquired in a business combination are distinguished from goodwill, when they are
separable or arise from contractual or other legal rights, and it is probable that future economic benefits will flow to HSBC, the cost of which
can be measured reliably.
Intangible assets include the present value of in-force long-term insurance business and long-term investment contracts with discretionary
participating features (‘PVIF’), computer software, trade names, mortgage servicing rights, customer lists, core deposit relationships, credit
card customer relationships and merchant or other loan relationships. Computer software includes both purchased and internally generated
software. The cost of internally generated software comprises all directly attributable costs necessary to create, produce and prepare the
software to be capable of operating in the manner intended by management. Costs incurred in the ongoing maintenance of software are
expensed immediately as incurred.
Intangible assets are subject to impairment review if there are events or changes in circumstances that indicate that the carrying amount
may not be recoverable. Where:
• intangible assets have an indefinite useful life, or are not yet ready for use, they are tested for impairment annually. An intangible asset
recognised during the current period is tested before the end of the current year; and where
• intangible assets have a finite useful life, except for PVIF, they are stated at cost less amortisation and accumulated impairment losses
and are amortised over their estimated useful lives. Estimated useful life is the lower of legal duration and expected useful life.
Intangible assets with finite useful lives are generally amortised, on a straight-line basis, over their useful lives as follows:
Trade names 10 years
Mortgage servicing rights between 5 and 12 years
Internally generated software between 3 and 5 years
Purchased software between 3 and 5 years
Customer/merchant relationships between 3 and 10 years
Other 10 years