15. Intangible assets

Intangible assets include the following items:

(i) Goodwill

Goodwill represents the excess cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary or business at the date of acquisition. Goodwill on acquisitions of subsidiaries and businesses is included in intangible assets. Goodwill is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous UK GAAP amounts subject to being tested for impairment at that date. Goodwill written off to equity prior to 1998 has not been reinstated and is not included in determining any subsequent profit or loss on disposal.

(ii) Sales commissions

Sales commissions are paid to distributors and to employees. In many instances, upfront sales commission is paid to distributors and to employees when a fund product is first launched, and is based on the amount of investors' monies introduced. This upfront commission is an incremental cost that is directly attributable to securing investors in fund products from which the Group earns income based on an investment management contract with the relevant fund. Accordingly an intangible asset is recognised in accordance with IFRS, representing the Group's contractual right to benefit from future income from providing investment management services. The carrying value of this intangible asset is based on the value of the initial upfront commission payments made to distributors and employees less an amortisation charge.

The amortisation period of upfront sales commissions is based on management's estimate of the weighted average period over which the Group is expected to earn economic benefit from the investor being invested in each fund product. Management estimates that this period is five years in both the current and the comparative year.

All unamortised upfront sales commission is subject to impairment testing each period to ensure that the future economic benefit arising from each fund product is in excess of the remaining unamortised commission. Where it is not, the unamortised portion is written down as a charge to the income statement.

(iii) Other intangible assets

Other intangible assets principally include computer software. Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. These costs are amortised using the straight-line method over their estimated useful lives (three to five years).

Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include software development and associated employee costs. Computer software development costs recognised as assets are amortised on a straight-line basis over their estimated useful lives (not exceeding three years).

For all intangible assets:

• The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.
• Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in the income statement.

Amortisation of sales commissions is included in the sales commissions line in the income statement and amortisation of other intangibles is included in other expenses. Impairment losses, if any, relating to sales commissions are included in sales commissions in the income statement and impairment losses, if any, relating to other intangibles are included in other expenses.