ING Direct 2013 Annual Report Download - page 138

Allocation of Goodwill to reporting units
After the above changes, the remaining goodwill is allocated to goodwill reporting units as follows:
Goodwill allocation to reporting units
2013 2012
Retail Netherlands 1 1
Retail Belgium 50 50
Retail Germany 349 349
Retail Central Europe 611 764
Commercial Banking 24 24
Insurance Europe 101 114
1,137 1,304
The changes in reportable segments as disclosed in Note 42 ‘Segments’ resulted in the above reporting units but did not impact the
outcome of the impairment test.
Goodwill impairment testing
Goodwill is tested for impairment at the lowest level at which it is monitored for internal management purposes. This level is defined as
the so called ‘reporting units’ as set out above. Goodwill is tested for impairment by comparing the carrying value of the reporting unit to
the best estimate of the recoverable amount of that reporting unit. The carrying value is determined as the IFRS-EU net asset value
including goodwill. The recoverable amount is estimated as the higher of fair value less cost to sell and value in use. Several methodologies
are applied to arrive at the best estimate of the recoverable amount.
As a first step of the impairment test, the best estimate of the recoverable amount of reporting units to which goodwill is allocated is
determined separately for each relevant reporting unit based on Price to Earnings, Price to Book, and Price to Assets under management
ratios. The main assumptions in this valuation are the multiples for Price to Earnings, Price to Book and Price to Assets under management;
these are developed internally but are either derived from or corroborated against market information that is related to observable
transactions in the market for comparable businesses. Earnings and carrying values are equal to or derived from the relevant measure
under IFRS-EU where available the test includes the use of market prices for listed business units.
If the outcome of this first step indicates that the difference between recoverable amount and carrying value may not be sufficient to
support the amount of goodwill allocated to the reporting unit, an additional analysis is performed in order to determine a recoverable
amount in a manner that better addresses the specific characteristics of the relevant reporting unit.
Such additional analyses were performed for the goodwill that was concluded to be impaired as set out above. For other reporting units,
the goodwill allocated to these reporting units was fully supported in the first step. For Retail Banking Central Europe, a second analysis
was necessary in 2011. Although in 2012 the goodwill allocated to Retail Banking Central Europe was fully supported in the first step, the
second test was performed in 2012 and confirmed the continued recognition of the related goodwill.
11 DEFERRED ACQUISITION COSTS
Changes in deferred acquisition costs
Life insurance Non-life insurance Total
2013 2012 2013 2012 2013 2012
Opening balance 4,513 10,165 36 39 4,549 10,204
Capitalised 616 1,659 815 624 1,674
Amortisation and unlocking –1,885 –1,051 –7 –15 –1,892 –1,066
Effect of unrealised revaluations in equity 660 –251 660 –251
Exchange rate differences –494 –244 –494 –244
Changes in the composition of the group and other
changes –2,094 –5,765 –3 –2,094 –5,768
Closing balance 1,316 4,513 37 36 1,353 4,549
For flexible life insurance contracts the growth rate assumption used to calculate the amortisation of the deferred acquisition costs for
2013 is 6.0% gross and 4.3% net of investment management fees (2012: 8.1% gross and 7.3% net of investment management fees).
Percentages are based on the portfolios from continuing operations.
In 2013, Changes in the composition of the group and other changes includes EUR –4,416 million as a result of the classification of ING
U.S. as held for sale and EUR 2,409 million as a result of the classification to continuing operations of ING Japan.
The separate reporting of the Japan Closed Block VA business line triggered a write-off of all deferred acquisition costs (DAC) related to
the Japan Closed Block VA business of EUR 1,405 million, partly compensated by a release of the Life insurance provision related to
Notes to the consolidated annual accounts of ING Group continued
136 ING Group Annual Report 2013