c. BRANDS
This represents the revenue generating value of the acquired brand and is determined using the relief from royalty method. Certain
brands are recognised as having an indefinite useful life as there is no foreseeable limit to the period over which the brand is expected
to generate net cash flows. Brand assets with an indefinite useful life are not subject to amortisation but are subject to impairment
testing annually or more frequently when indicators of impairment are identified.
G. IMPAIRMENT TESTING
For each category an impairment trigger review is conducted and where necessary the recoverable amount of particular assets
determined.
I. For the year ended 30 June 2015
There was no impairment charge recognised during the year.
II. For the year ended 30 June 2014
There was no impairment charge recognised during the year.
NOTE 17. GOODWILL
CONSOLIDATED
2015
2014
$m
$m
A. COMPOSITION
Goodwill
2,915
2,898
Net foreign exchange movements
(25)
1
2,890
2,899
B. RECONCILIATION OF MOVEMENTS
Balance at the beginning of the financial year
2,899
1,666
Additional amounts arising from business acquisitions
17
1,194
Net foreign currency movements
(26)
39
Balance at the end of the financial year
2,890
2,899
C. ALLOCATION TO CASH GENERATING UNITS
Australia Personal Insurance operations
771
763
Australia Commercial Insurance operations
1,452
1,443
New Zealand operations
611
645
Asia operations
56
48
2,890
2,899
As the Group incorporates businesses into the Group and/or reorganises the way businesses are managed, reporting structures may
change requiring a reconsideration of the identification of the cash generating units.
The goodwill relating to certain acquisitions outside Australia is denominated in currencies other than Australian dollars and so is
subject to foreign exchange rate movements.
D. IMPAIRMENT ASSESSMENT
The impairment testing of goodwill involves the use of accounting estimates and assumptions. The recoverable amount of each cash
generating unit is determined on the basis of value in use calculations. The value in use is calculated using a discounted cash flow
methodology covering a ten or twenty year period with an appropriate terminal value at or before the end of year ten or twenty for each
cash generating unit. The carrying value of identified intangible assets is deducted from the value generated from the cash flow
projections to arrive at a recoverable value for goodwill which is then compared with the carrying value of goodwill.
I. Assumptions used
The following describes the key assumptions on which management has based its cash flow projections to undertake impairment
testing of goodwill.
a. CASH FLOW FORECASTS
For the mature markets, cash flow forecasts are based on ten year valuation forecasts for growth and profitability. Twenty year periods
are only used in emerging markets, to enable appropriate phasing to terminal values.
b. TERMINAL VALUE
Terminal value is calculated using a perpetuity growth formula based on the cash flow forecast for year five or ten, terminal growth rate
in profit or premium and, where appropriate, terminal insurance margin. Terminal growth rates and insurance margins are based on
past performance and management's expectations for future performance in each segment and country. The terminal growth rate
assumptions used in the Group's impairment assessment for significant cash generating units as at 30 June 2015 are: Australia
Personal Insurance operations 4.5% (2014-4.5%), Australia Commercial Insurance operations 4.5% (2014-4.5%) and New Zealand
operations 3.5% (2014-3.5%).
78 IAG ANNUAL REPORT 2015
