Download table as excel file Download table as excel file| 2007 | 2006 | |||||||||||||
| £m | £m | |||||||||||||
| Net book value | ||||||||||||||
| At beginning of year | 6,092 | 6,022 | ||||||||||||
| Acquisitions | 879 | 390 | ||||||||||||
| Disposals | (17) | (14) | ||||||||||||
| Exchange and other adjustments | 60 | (306) | ||||||||||||
| At end of year | 7,014 | 6,092 | ||||||||||||
Goodwill is allocated to business operations according to business segments identified by the Group under IAS 14, as follows:
Download table as excel file| 2007 | 2006 | |||||||||||||
| £m | £m | |||||||||||||
| UK Banking | 3,131 | 3,132 | ||||||||||||
| Barclaycard | 400 | 403 | ||||||||||||
| International Retail and Commercial Banking | 1,682 | 1,481 | ||||||||||||
| Barclays Capital | 147 | 86 | ||||||||||||
| Barclays Global Investors | 1,261 | 673 | ||||||||||||
| Barclays Wealth | 393 | 317 | ||||||||||||
| Goodwill | 7,014 | 6,092 | ||||||||||||
The Barclays Financial Planning business previously managed and reported within Barclays Wealth, is now managed and reported within UK Banking. Goodwill of £312m relating to this business has been transferred to UK Banking and the comparative figures restated.
Goodwill is reviewed annually for impairment, or more frequently when there are indications that impairment may have occurred by comparing the carrying value to its recoverable amount.
The recoverable amount of each operation’s goodwill is based on value-in-use calculations. The calculation is based upon discounting expected pre-tax cash flows at a risk adjusted interest rate appropriate to the cash generating unit, the determination of both of which requires the exercise of judgement. The estimation of pre-tax cash flows is sensitive to the periods for which forecasts are available and to assumptions regarding the long-term sustainable cash flows. While forecasts are compared with actual performance and external economic data, expected cash flows naturally reflect management’s view of future performance.
At 31st December 2007, the goodwill allocated to UK Banking of £3,131m (2006: £3,132m) included £3,130m (2006: £3,130m) relating to Woolwich, and the amount allocated to International Retail and Commercial Banking of £1,682m (2006: £1,481m) included £1,054m (2006: £953m) relating to Absa.
The remaining aggregate goodwill of £2,830m (2006: £2,009m) comprised of balances not considered individually significant.
The values assigned to key assumptions reflect past experience and management judgement. The recoverable amount calculations performed for the significant amounts of goodwill are sensitive to changes in the following key assumptions:
Term of cash flow forecasts and growth ratesCash flows are based on internal management information for a period of up to three years, after which a growth factor suitable for the business is applied. Growth rates are based on the projected local inflation rates over the term of estimated cash flows.
The business operation containing Woolwich has applied a growth factor of 2% (proxy for inflation) to cash flows for the period 2011 to 2016. Absa has applied a growth rate of 8% to cash flows for the three years 2011 to 2013, and a rate of 4% for the years 2014 to 2021. The use of longer cash flow projections is justified by the long-term nature of these businesses within the Barclays Group.
The business operation containing Woolwich has applied a discount factor of 15%, and Absa has applied 13.62% to forecast cash flows used in the impairment testing.
Management believes that reasonable changes in key assumptions used to determine the recoverable amounts of Absa and Woolwich goodwill will not result in impairment.
No impairment was identified in 2007 or 2006.