Annual Financial Statements 2011 of Bank Austria

Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (CoNTINuED)
The annual impairment test of goodwill, as required by IAS 36, is carried out as at the end of each reporting period. In addition, impairment tests are
performed again whenever there is an indication that goodwill may be impaired.
The carrying amount of a cash-generating unit is determined on the basis of pro-rata equity and the carrying amount of goodwill allocated to that unit.
The recoverable amount relating to each CGU is the value in use and is determined on the basis of future cash flows expected from each CGU to
which goodwill has been allocated.
The following valuation calculations are based on the 2012 budget and the current five-year plan. According to current information available to the
Management Board of Bank Austria, the 2012 budget and the assumptions for the years 2013 to 2021 are in line with probable developments at the
respective business units (cash-generating units). Given the imponderable nature of future economic trends, actual developments may also differ from,
and be significantly worse than, these assumptions.
For the fair value calculation the Standard UniCredit Group Discounted Cash Flow Valuation Model (3-phase model) was employed throughout the
Group using the following assumptions:
• Phase 1 (2011): the figures are based on year-end projections for net profit and risk-weighted assets of the respective cash-generating units.
• Phase 2 (2012–2021)
– Phase 2a – planning period (2012–2015): the 2012 budget figures for net profit and RWAs were used for 2012, and multi-year planning figures
were used for subsequent years.
– Phase 2b (2016–2021): in this phase the growth rates of net income and risk-weighted assets converge towards 2%. The discount rate in the
form of cost of equity (Ke) declines to the corresponding terminal value level (for details see page 86).
• Phase 3 – perpetual annuity: calculation of the present value of a perpetual annuity on the assumption of a long-term growth rate which takes the
sustained long-term economic growth expected by Bank Austria for the euro area into account (2%).
Phase 2a is the result of a detailed planning process which does not exceed the 5-year horizon in accordance with IAS 36. The purpose of phase 2b is
to illustrate the expected long-term convergence of growth rates in these markets to those in Europe.
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