Notes to the Group Financial Statements
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| 13. Intangible assets | |||||
| Other intangible assets | |||||
| Goodwill $m |
Sales commissions $m |
Customer relationships $m |
Other $m |
Total $m |
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| Cost: | |||||
| At 1 April 2006 | 974 | 618 | 156 | 64 | 838 |
| Currency translation difference | 11 | 1 | – | – | 1 |
| Acquisition of subsidiary or business | 33 | – | 22 | 10 | 32 |
| Additions | 11 | 219 | – | 24 | 243 |
| Disposals / redemptions | – | (78) | – | (9) | (87) |
| Reclassifications | – | 3 | (1) | (2) | – |
| Transfers to discontinued operations | (128) | – | (177) | (47) | (224) |
| At 31 March 2007 | 901 | 763 | – | 40 | 803 |
| Amortisation: | |||||
| At 1 April 2006 | (140) | (265) | (6) | (19) | (290) |
| Currency translation difference | (1) | (1) | – | – | (1) |
| Disposals | – | 40 | – | 1 | 41 |
| Amortisation | – | (129) | (12) | (13) | (154) |
| Impairment | – | – | – | (3) | (3) |
| Reclassifications | – | (3) | – | 3 | – |
| Transfers to discontinued operations | 25 | – | 18 | 15 | 33 |
| At 31 March 2007 | 116 | (358) | – | (16) | (374) |
| Net book value at 31 March 2007 | 785 | 405 | – | 24 | 429 |
| Cost: | |||||
| At 1 April 2005 | 966 | 525 | 4 | 39 | 568 |
| Currency translation difference | 8 | – | – | – | – |
| Acquisition of subsidiary or business | – | – | 147 | 17 | 164 |
| Additions | – | 157 | 5 | 15 | 177 |
| Disposals | – | (70) | – | (1) | (71) |
| Reclassifications | – | 6 | – | (6) | – |
| At 31 March 2006 | 974 | 618 | 156 | 64 | 838 |
| Amortisation: | |||||
| At 1 April 2005 | (139) | (193) | (1) | (15) | (209) |
| Currency translation difference | (1) | – | – | – | – |
| Disposals | – | 40 | – | 2 | 42 |
| Amortisation | – | (110) | (5) | (8) | (123) |
| Reclassifications | – | (2) | – | 2 | – |
| At 31 March 2006 | (140) | (265) | (6) | (19) | (290) |
| Net book value at 31 March 2006 | 834 | 353 | 150 | 45 | 548 |
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Other intangible assets include capitalised technology platforms, other software costs, trade names and licences. Amortisation of sales commissions is included in cost of sales in the income statement and amortisation of other intangibles is included in administrative expenses. Impairment losses, if any, are included in administrative expenses in the income statement. Additions included in goodwill relate to the reassessment of earnouts. Goodwill and other intangible assets with a net book value of $294 million attributable to Brokerage operations have been reclassified as discontinued operations (Note 8) in the year ended 31 March 2007. |
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| (a) Impairment tests for goodwill | |||
| Goodwill is allocated to cash generating units equivalent to each of the Group’s acquisitions categorised by business segment. The carrying amounts are presented below: | |||
| 2007 $m |
2006 $m |
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| Asset Management: | |||
| Glenwood | 76 | 76 | |
| RMF | 621 | 621 | |
| Man Investments Australia | 88 | 76 | |
| 773 | |||
| Brokerage: | |||
| GNI | 52 | ||
| Fox | 7 | ||
| Union Cal | 1 | ||
| FADC | 1 | ||
| 61 | |||
| 785 | 834 | ||
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To determine whether impairment exists, the carrying value of goodwill is compared with the asset’s recoverable amount on an annual basis at the balance sheet date. All of the recoverable amounts were calculated based on ‘value in use’. To calculate the value in use, an estimate of future cash flows from each acquisition and expectations about possible variations in the amount of these cash flows have been considered, including where acquired businesses have been integrated into existing businesses. An appropriate risk-adjusted pre-tax discount rate is applied to these future cash flows, resulting in a balance representing their value in use, which is compared with the carrying value of goodwill to determine whether impairment exists. The key assumptions used by management for value in use calculations for each acquisition, by business segment, include: |
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| Rates (p.a) | |||
| Asset Management: | |||
| Net management fee growth | 5% | ||
| Net performance fee growth | 0% | ||
| Discount rate | 10% | ||
| Brokerage: | |||
| Growth rate | 0% | ||
| Discount rate | 10% | ||
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Discount rates used are pre-tax and reflect estimates that the market would expect of an investment with an equivalent risk profile. A range of growth rates is used to simulate expected best and worst case scenarios, taking into consideration past performance and expectations for market development. The growth rates used in the discounted cash flow models are conservative in that they are lower than management’s expectations and those included in the budgets for future years. In Asset Management, even if the growth rates applied to net management fee income were reduced to zero, net performance fee income excluded altogether and the discount rate increased to 15%, there would still be no impairment to goodwill. As a result of these calculations, no impairment was identified. (b) Intangible assets with finite useful lives |
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