Goodwill and other intangible assets as at 31 December are as follows:
 Download XLS |
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General (incl. |
|
|
|
Banking |
Insurance |
eliminations) |
Total |
|
31 December 2007 |
|
|
|
|
|
Goodwill |
1,025 |
490 |
|
1,515 |
|
VOBA |
|
1,007 |
|
1,007 |
|
Purchased software |
141 |
19 |
|
160 |
|
Internally developed software |
268 |
24 |
|
292 |
|
Other intangible assets |
125 |
240 |
|
365 |
|
Total |
1,559 |
1,780 |
|
3,339 |
|
|
|
|
|
|
|
31 December 2006 |
|
|
|
|
|
Goodwill |
744 |
235 |
|
979 |
|
VOBA |
|
800 |
|
800 |
|
Purchased software |
73 |
15 |
|
88 |
|
Internally developed software |
60 |
7 |
|
67 |
|
Other intangible assets |
103 |
224 |
|
327 |
|
Total |
980 |
1,281 |
|
2,261 |
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|
|
|
|
|
31 December 2005 |
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|
|
|
|
Goodwill |
475 |
203 |
|
678 |
|
VOBA |
|
870 |
|
870 |
|
Purchased software |
49 |
17 |
|
66 |
|
Internally developed software |
2 |
|
|
2 |
|
Other intangible assets |
108 |
198 |
|
306 |
|
Total |
634 |
1,288 |
|
1,922 |
Intangible assets are amortised in accordance with the expected lives of the assets. Goodwill is tested for impairment at least annually by comparing the recoverable amount to the carrying value.
Other intangible assets include intangible assets with definite useful lives, such as concessions, patents, licences, trademarks and other similar rights. In general, software is amortised over a maximum of five years and other intangible assets have an expected useful life of 10 years at most.
Value of business acquired (VOBA) is the difference between the fair value at acquisition date and the subsequent book value of a portfolio of contracts acquired separately or in a business combination. VOBA is recognised as an intangible asset and amortised over the income recognition period of the portfolio of contracts acquired.
With the exception of goodwill, Fortis does not have intangible assets with indefinite useful lives.
Changes in Goodwill and other intangible assets
Changes in Goodwill and other intangible assets for the years 2006 and 2007 are shown below.
| Download XLS |
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2006 |
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Internally |
Other |
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Purchased |
developed |
intangible |
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Goodwill |
VOBA |
software |
software |
assets |
Total |
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|
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|
|
|
|
|
|
Acquisition cost as at 1 January |
680 |
1,030 |
240 |
2 |
386 |
2,338 |
|
Acquisitions/divestments of subsidiaries |
342 |
7 |
4 |
|
75 |
428 |
|
Additions |
|
|
63 |
65 |
8 |
136 |
|
Adjustments arising from subsequent changes in value of assets and liabilities |
3 |
|
|
|
|
3 |
|
Reversal of cost due to disposals |
|
|
(10) |
|
|
(10) |
|
Foreign exchange differences |
(57) |
|
(2) |
|
(9) |
(68) |
|
Other |
17 |
(2) |
4 |
|
(9) |
10 |
|
Acquisition cost as at 31 December |
985 |
1,035 |
299 |
67 |
451 |
2,837 |
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|
|
|
|
|
|
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Accumulated amortisation |
|
(160) |
(174) |
|
(67) |
(401) |
|
Acquisitions/divestments of subsidiaries |
|
|
(2) |
|
|
(2) |
|
Amortisation expense |
|
(76) |
(34) |
|
(39) |
(149) |
|
Reversal of amortisation due to disposals |
|
|
8 |
|
|
8 |
|
Foreign exchange differences |
|
|
1 |
|
1 |
2 |
|
Other |
|
3 |
(10) |
|
(9) |
(16) |
|
Accumulated amortisation |
|
(233) |
(211) |
|
(114) |
(558) |
|
|
|
|
|
|
|
|
|
Impairments as at 1 January |
(2) |
|
|
|
(13) |
(15) |
|
Divestments of subsidiaries |
|
|
|
|
|
|
|
Increase of impairments charged to the income statement |
(5) |
(3) |
|
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|
(8) |
|
Reversal of impairments credited to the income statement |
|
4 |
|
|
|
4 |
|
Other |
1 |
(3) |
|
|
3 |
1 |
|
Impairments as at 31 December |
(6) |
(2) |
|
|
(10) |
(18) |
|
|
|
|
|
|
|
|
|
Goodwill and other intangible assets |
979 |
800 |
88 |
67 |
327 |
2,261 |
|
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2007 |
|
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Acquisition cost as at 1 January |
985 |
1,035 |
299 |
67 |
451 |
2,837 |
|
Acquisitions/divestments of subsidiaries |
563 |
318 |
6 |
|
29 |
916 |
|
Additions |
|
|
105 |
226 |
52 |
383 |
|
Adjustments arising from subsequent changes in value of assets and liabilities |
1 |
|
|
|
|
1 |
|
Reversal of cost due to disposals |
|
|
(19) |
(2) |
|
(21) |
|
Foreign exchange differences |
(26) |
(22) |
(1) |
(1) |
(4) |
(54) |
|
Other |
(2) |
(3) |
(7) |
5 |
|
(7) |
|
Acquisition cost as at 31 December |
1,521 |
1,328 |
383 |
295 |
528 |
4,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortisation |
|
(233) |
(211) |
|
(114) |
(558) |
|
Acquisitions/divestments of subsidiaries |
|
|
(1) |
|
(2) |
(3) |
|
Amortisation expense |
|
(83) |
(45) |
(3) |
(39) |
(170) |
|
Reversal of amortisation due to disposals |
|
|
17 |
|
|
17 |
|
Foreign exchange differences |
|
1 |
1 |
|
|
2 |
|
Other |
|
(1) |
16 |
|
(8) |
7 |
|
Accumulated amortisation |
|
(316) |
(223) |
(3) |
(163) |
(705) |
|
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|
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|
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Impairments as at 1 January |
(6) |
(2) |
|
|
(10) |
(18) |
|
Divestments of subsidiaries |
|
|
|
|
|
|
|
Increase in impairments charged to the income statement |
|
(3) |
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|
(3) |
|
Reversal of impairments credited to the income statement |
|
|
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|
10 |
10 |
|
Other |
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Impairments as at 31 December |
(6) |
(5) |
|
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|
(11) |
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Goodwill and other intangible assets |
1,515 |
1,007 |
160 |
292 |
365 |
3,339 |
Impairment on goodwill
Impairment testing on goodwill is performed annually at the end of the year by comparing the recoverable amount of cash-generating units (CGU) to their carrying amount. The recoverable amount is determined by the highest of the value in use or fair value less costs to sell. The type of acquired entity determines the definition of the type of CGU. Currently all CGU’s have been defined at (legal) entity level.
The recoverable amount of a CGU is assessed through a discounted cash-flow model of the anticipated future cash flows of the CGU. The key assumptions used in the cash-flow model depend on input reflecting various financial and economic variables, including the risk-free rate in a given country and a premium to reflect the inherent risk of the entity being evaluated. These variables are determined on the basis of management’s judgement. If the entity is listed on a stock market, also this market price is considered as an element in the evaluation.
There were no impairments on goodwill in 2007 (2006: EUR 4 million).
The breakdown of goodwill and impairments for the main cash-generating units as at 31 December 2007 is as follows:
| Download XLS |
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Goodwill |
Impair- |
Net |
|
Method used for |
|
|
amount |
ments |
amount |
Segment |
recoverable amount |
|
Cash-generating unit (CGU) |
|
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Fundamentum Asset Management |
28 |
|
28 |
Merchant & |
Value in use |
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Private Banking |
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Centrapriv |
26 |
|
26 |
Merchant & |
Value in use |
|
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Private Banking |
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Fortis Commercial Finance |
43 |
|
43 |
Merchant & |
Value in use |
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Private Banking |
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Fortis Energy |
127 |
|
127 |
Merchant & |
Value in use |
|
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Private Banking |
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Alpha Credit |
22 |
|
22 |
Retail Banking |
Value in use |
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Von Essen KG Bank |
28 |
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28 |
Retail Banking |
Value in use |
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Cadogan |
119 |
|
119 |
Retail Banking |
Value in use |
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Fortis (UK) Limited (Outright) |
20 |
|
20 |
Insurance International |
Value in use |
|
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Fortis Vastgoed Ontwikkeling |
35 |
|
35 |
Insurance Netherlands |
Value in use |
|
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Milleniumbcp Fortis Limited |
168 |
|
168 |
Insurance International |
Value in use |
|
|
|
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Fortis Bank AS (Turkey) |
308 |
|
308 |
Multi-segment banking |
Value in use |
|
|
|
|
|
|
and market price |
|
Fortis Insurance Company Asia |
241 |
|
241 |
Insurance International |
Value in use |
|
|
|
|
|
|
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|
Dominet S.A. |
221 |
|
221 |
Retail Banking |
Value in use |
|
|
|
|
|
|
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|
Captive Finance |
17 |
|
17 |
Merchant & |
Value in use |
|
|
|
|
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Private Banking |
|
|
Prestibel Left Village |
10 |
|
10 |
Insurance Belgium |
Value in use |
|
|
|
|
|
|
|
|
Other |
108 |
6 |
102 |
|
Value in use |
|
|
|
|
|
|
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Total |
1,521 |
6 |
1,515 |
|
|
Amortisation of VOBA
Expected amortisation expenses for VOBA from 2008 onwards are as follows:
| Download XLS |
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|
2008 |
2009 |
2010 |
2011 |
2012 |
Later |
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Estimated amortisation of VOBA |
81 |
77 |
65 |
62 |
58 |
664 |