Page 105 - Suncorp_Review

Suncorp Group Limited Annual Report 2010/11 103

18.1 Impairment tests for cash-generating units containing goodwill

For the purpose of the annual impairment test, goodwill is allocated to signifcant cash-generating units (CGU) which represent the Suncorp Group’s operating segments. The carrying amount of goodwill allocated to each CGU is then compared to its recoverable amount and if the recoverable amount is lower, the asset is written down. For the year ended 30 June 2011, no impairment loss has been recognised (2010: nil).

Goodwill allocated to each CGU has not changed during the current fnancial year as a result of the Suncorp Group’s restructure.

CONSOLIDATED

2011 2010 $m $m

The following CGUs have signifcant carrying amounts of goodwill

General Insurance – Commercial unit 1,759 1,759 General Insurance – Personal unit 2,377 2,373 General Insurance – New Zealand unit 241 250 Life unit 372 515 Banking unit 257 250 5,006 5,147

The recoverable amount of each CGU is based on its value in use. The values assigned to the key assumptions represent management’s assessment of future trends in the industry and are based on both external and internal sources of data. (a) General Insurance and Banking CGUs

Value in use for the General Insurance and Banking CGUs was determined by discounting the future cash fows generated from the continuing use of units and was based on the following key assumptions, for which the values have been obtained on the basis of past experience:

–– Cash fows being projected from the fnancial forecasts prepared by the business units covering a fve-year period from 1 July 2011 (2010: fve year period from 1 July 2010). Cash fows beyond the next fve years (2010: fve years) are extrapolated using a constant growth rate of 3.0% (2010: 3.0%), which does not exceed the long-term average growth rate for the industry.

–– Post-tax discount rates ranging from 9.6% to 11.7% (2010: 10.5% to 11.5%), representing each CGU’s cost of capital based on a weighted average of risk-based capital. This is equivalent to 12.6% to 15.6% (2010: 14.1% to 15.5%) on a pre‑tax basis.

The following table summarises the key assumptions used in the value in use calculations and, where relevant, shows the values the assumptions would need to move to (trigger points) before the carrying value for the CGU would exceed its recoverable value.

Return on GI Return on Average growth in net Discount rate Terminal growth rate Technical Reserves GI Shareholder Funds earned premium Assumed Trigger point Assumed Trigger point Assumed Trigger point Assumed Trigger point Assumed Trigger point Cash-generating unit % % % % % % % % % %

2011

Personal Insurance 9.6 13.3 3.0 < 0 6.4 < 0 6.6 < 0 5.3 < 0 Commercial Insurance 9.6 12.1 3.0 < 0 6.4 2.6 6.6 < 0 6.2 < 0 Vero New Zealand 9.6 10.8 3.0 1.2 5.5 1.2 6.0 2.3 5.5 < 0 Banking 11.7 13.0 3.0 1.1 n/a n/a n/a n/a n/a n/a

Return on GI Return on Average growth in net Discount rate Terminal growth rate Technical Reserves GI Shareholder Funds earned premium Assumed Trigger point Assumed Trigger point Assumed Trigger point Assumed Trigger point Assumed Trigger point Cash-generating unit % % % % % % % % % %

2010

Personal Insurance 10.5 17.1 3.0 n/a 5.7 < 0 6.8 < 0 7.0 < 0 Commercial Insurance 10.5 12.5 3.0 n/a 5.7 2.0 6.8 0.0 7.5 < 0 Vero New Zealand 10.5 15.3 3.0 n/a 5.5 < 0 5.8 < 0 7.6 < 0 Banking 11.5 14.6 3.0 n/a n/a n/a n/a n/a n/a n/a

n/a = assumption not relevant to this CGU or trigger point unlikely to be reached.