Our Accounts 101
Notes to the financial statements continued
31 December 2012
26. Intangible assets (continued)
Other
intangible
assets
Society £m
Cost:
At 1 January 2012 50.9
At 31 December 2012 50.9
Accumulated amortisation:
At 1 January 2012 46.3
Charge for the year 4.6
At 31 December 2012 50.9
Net book value at 31 December 2012 -
Cost:
At 1 January 2011 50.9
At 31 December 2011 50.9
Accumulated amortisation:
At 1 January 2011 41.6
Charge for the year 4.7
At 31 December 2011 46.3
Net book value at 31 December 2011 4.6
Key assumptions used in the annual impairment testing of intangible assets
The key assumptions used for impairment testing are set out below for both the long-term insurance business and the general insurance business.
The long-term insurance business incorporates both the Heritage and Life businesses.
Statements and Reviews
Long-term insurance business
The recoverable amount of the long-term insurance business has been determined using cash flow predictions based on financial plans approved
by management covering a five-year period, with a terminal growth rate of 2% applied thereafter. The forecast cash flows have been discounted at
a pre-tax rate of 10%. Based on the above assumptions, the recoverable amount exceeded the carrying amount including goodwill by £156.8m.
A two percentage point increase in the discount rate would reduce the recoverable amount by £52.3m; the discount rate would need to be
increased to 23% to reduce the recoverable amount to zero.
A reduction in the forecast cash flows of 10% per annum would reduce the recoverable amount by £55.7m; the forecast cash flows would need to
be reduced by 25% per annum to reduce the recoverable amount to zero.
Our Businesses
General insurance business
The recoverable amount of the general insurance business has been determined using cash flow predictions based on financial plans approved
by management covering a five-year period, with a terminal growth rate of 2% applied thereafter. The forecast cash flows have been discounted at
a pre-tax rate of 10%. Based on the above assumptions, the recoverable amount exceeded the carrying amount including goodwill by £755.1m.
A two percentage point increase in the discount rate would reduce the recoverable amount by £285.9m; the discount rate would need to be
increased to 20% to reduce the recoverable amount to zero.
A reduction in the forecast cash flows of 10% per annum would reduce the recoverable amount by £151.4m; the forecast cash flows would need
Risk Management
to be reduced by 50% per annum to reduce the recoverable amount to zero.
Corporate Governance
Our Accounts