annual report 2011

IOOF | annual report 2011
The estimated useful lives for the current and comparative years are
as follows:
• adviser relationships 5 - 10 years
• computer software 2½ - 4 years
• customer relationships 10 - 20 years
• brand names 20 years
• contract agreements 9 - 10 years.
Amortisation methods, useful lives and residual values are reviewed
at each reporting date and adjusted if appropriate.
(g) Leased assets
Leases in terms of which the Group assumes substantially all the risks
and rewards of ownership are classified as finance leases. Upon initial
recognition the leased asset is measured at an amount equal to the
lower of its fair value and the present value of the minimum lease
payments. Subsequent to initial recognition, the asset is accounted
for in accordance with the accounting policy applicable to that asset.
Other leases are operating leases and are not recognised in the
Group’s statement of financial position.
(h) Impairment
(i)
Non-derivative financial assets
A financial asset not carried at fair value through profit or loss is
assessed at each reporting date to determine whether there is
objective evidence that it is impaired. A financial asset is impaired if
objective evidence indicates that a loss event has occurred after the
initial recognition of the asset, and that the loss event had a negative
effect on the estimated future cash flows of that asset that can be
estimated reliably.
Objective evidence that financial assets (including equity securities)
are impaired can include default or delinquency by a debtor,
restructuring of an amount due to the Group on terms that the
Group would not consider otherwise, indications that a debtor or
issuer will enter bankruptcy, adverse changes in the payment status
of borrowers or issuers in the Group, economic conditions that
correlate with defaults or the disappearance of an active market
of a security. In addition, for an investment in an equity security,
a significant or prolonged decline in its fair value below its cost is
objective evidence of impairment.
An impairment loss in respect of a financial asset measured at
amortised cost is calculated as the difference between its carrying
amount and the present value of the estimated future cash flows
discounted at the asset’s original effective interest rate. Losses are
recognised in profit or loss and reflected as an allowance account
against loans and receivables. Interest on the impaired asset continues
to be recognised. When a subsequent event (eg. a repayment by
a debtor) causes the amount of impairment loss to decrease, the
decrease in impairment loss is reversed through profit or loss.
Available-for-sale financial assets
Impairment losses on available-for-sale financial assets are
recognised by reclassifying the losses accumulated in the
investment revaluation reserve, to profit or loss. The cumulative
loss that is reclassified from equity to profit or loss is the
difference between the acquisition cost, net of any principal
repayment and amortisation, and the current fair value, less any
impairment loss previously recognised in profit or loss.
Changes in impairment provisions attributable to application
of the effective interest method are reflected as a component
of interest income. If, in a subsequent period, the fair value of
an impaired available-for-sale debt security increases and the
increase can be related objectively to an event occurring after
the impairment loss was recognised in profit or loss, then the
impairment loss is reversed, with the amount of the reversal
recognised in profit or loss. However, any subsequent recovery
in the fair value of an impaired available-for-sale equity security
is recognised in other comprehensive income.
(ii)
Non-financial assets
The carrying amounts of the Group’s non-financial assets, other
than deferred tax assets, are reviewed at each reporting date
to determine whether there is any indication of impairment. If
any such indication exists, then the asset’s recoverable amount
is estimated. For goodwill, and intangible assets that have
indefinite useful lives or that are not yet available for use, the
recoverable amount is estimated each year at the same time.
An impairment loss is recognised if the carrying amount of
an asset or its related cash-generating unit (CGU) exceeds its
estimated recoverable amount.
The recoverable amount of an asset or cash-generating unit is
the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of
money and the risks specific to the asset. For the purpose of
impairment testing, assets that cannot be tested individually
are grouped together into the smallest group of assets that
generates cash inflows from continuing use that are largely
independent of the cash inflows from continuing use of other
assets or groups of assets (the cash-generating unit “CGU”).
Subject to an operating segment ceiling test, for the purposes
of goodwill impairment testing, CGUs to which goodwill has
been allocated are aggregated so that the level at which
impairment is tested reflects the lowest level at which goodwill
is monitored for internal reporting purposes. Goodwill acquired
in a business combination is allocated to groups of CGUs that
are expected to benefit from the synergies of the combination.
Impairment losses are recognised in profit or loss. Impairment
losses recognised in respect of CGUs are allocated first to reduce
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