75 Property and equipment
Contents Management report Corporate governance Consolidated financial statements Financial statements Pillar 3
Goodwill is reviewed for impairment by comparing the carrying
amount of the cash generating unit (including goodwill) with
the best estimate of the value in use of the cash generating
unit. For this purpose, the best estimate of the value in use
determined on the basis of cash flow forecasts is used first, as
taken from annual medium-term plans drawn up as part of
the annual planning cycle.The plans reflect the management's
best estimates of market conditions, market restrictions,
discount rates (before taxation), growth in operations, etc.
If the outcome shows that there is no significant difference
between the fair value and the carrying amount, the fair
value is assessed in more detail, with the relevant share
price being used for listed companies. In addition, valuation
models are used which are similar to the initial recognition
of an acquisition, peer reviews, etc. The valuation models are
tested and include the development of the activities since the
acquisition, the most recent income and expenses forecasts
drawn up by management, as well as updated forecasts,
assessments of discount rates, final values of growth rates, etc.
Peer reviews include an assessment of the price/earnings ratio
and price/carrying amount ratio of similar listed companies,
or similar market transactions. Assumptions are generally
based on experience, management's best estimates of future
developments and, if available, external data.
The impairment of goodwill of 623 (2014: 32) is related
to RNA and is recognised in the 'Wholesale banking and
international retail ban king'. The outlook for the future
profitability of RNA deteriorated during the first half of 2015.
The loan portfolio of RNA has developed less favourably
than expected. The development of costs and stricter capital
requirements as a result of increased regulatory pressure also
led to a deterioration in the outlook for RNA during the first
six months of 2015.These elements, in combination with the
recent closure of some units, gave an indication of potential
impairment of the goodwill.The test to establish whether this
potential impairment had occurred, resulted in a downward
adjustment of goodwill (of EUR 604 million). This was mainly
the result of the decline in growth parameters from on average
10.9% to 7.5%forthe next five years, a decline of the multiplier
(used for calculating the present value of the discounted cash
flows after the forecast period) from 18 to 16 and a rise in
the discount factor from 13% to 14%. The recoverable value
of approximately USD 1.6 billion is based on the estimated
fair value less the costs of sale and is a Category 3 valuation
according to the fair value hierarchy.This is because some
inputs for determining the recoverable value consist of non-
observable market data. On 31 December 2015, the remaining
goodwill in respect of RNA amounted to 131At year-end
2014, the value in use was higher than the carrying amount.
There was therefore no reason to calculate the fair value less the
costs of sale at that time.
Impairments of software developed in-house and other
intangible assets are not individually material.The total
impairments of software developed in-house was 30 (2014 29).
This was mainly caused by the fact that the software is (partly)
no longer used.
in millions of euros
Land and
buildings
Equipment
Total
Year ended 31 December 2015
Opening balance
1,969
5,179
7,148
Foreign exchange differences
14
105
119
Purchases
109
2,400
2,509
Disposals
(47)
(722)
(769)
Impairments -
Depreciation
(109)
(141)
(250)
Depreciation of operating lease
assets
(1,002)
(1,002)
Other
9
1
10
Closing balance
1,945
5,820
7,765
Cost
3,292
9,285
12,577
Accumulated depreciation and
impairments
(1,347)
(3,465)
(4,812)
Net carrying amount
1,945
5,820
7,765
in millions of euros
Land and
buildings
Equipment
Total
Year ended 31 December 2014
Opening balance
2,101
4,800
6,901
Foreign exchange differences
13
108
121
Purchases
121
1,630
1,751
Disposals
(74)
(484)
(558)
Impairments
(11)
(1)
(12)
Depreciation
(109)
(131)
(240)
Depreciation of operating lease
assets
(914)
(914)
Other
(72)
171
99
Closing balance
1,969
5,179
7,148
Cost
3,314
8,207
11,521
Accumulated depreciation and
impairments
(1,345)
(3,028)
(4,373)
Net carrying amount
1,969
5,179
7,148
225 Notes to the consolidated financial statements
