29. Goodwill

Impairment test

Impairment test is the comparison of carrying amounts (including goodwill) and recoverable amounts of CGUs. CGUs are particular entities or their foreign branches which are subject to separate internal monitoring. An impairment test regarding goodwill and intangible assets with indefinite period of use was prepared as at 31 December 2014. The recoverable amount of PZU Lietuva was determined based on the selling price less the costs to sell (EUR 54,000 thousand; additional information on the sale is presented in Note 59.9.1). The recoverable amount of other CGUs was determined based on value in use, using the discounted cash flow method based on financial projections not exceeding 5 years. The adopted discount rates have been determined in accordance with the CAPM model. Risk-free rates have been determined based on the yield of 10-year government bonds offered by the country where the CGU has it registered seat; the beta ratio has been based on ratios of similar listed entities. Market premiums range between 5.5 and 6.0%. In the case of insurance companies, the projected cash flows include the need to maintain an adequate level of own funds (for branches that do not manage investments, assets under management at the level of the PZU were allocated pro forma). Terminal growth rates were adopted depending on the assumed long-term development prospects and the expected growth of the insurance market.

As a result of the test, there was no reason for impairment losses recognition. The table below shows the surplus of the recoverable amounts over the carrying amounts and the maximum discount rates and minimum terminal growth rate, at the level of which the carrying amount of a CGU equals its recoverable amount.