Citigroup Inc.

The following table shows reporting units with goodwill balances asof December 31, 2010, and the excess of fair value as a percentage overallocated book value as of the annual impairment test.In millions of dollarsReporting unit (1)Fair value as a % ofallocated book value GoodwillNorth America Regional Consumer Banking 170% $ 2,518EMEA Regional Consumer Banking 168 338Asia Regional Consumer Banking 344 6,045Latin America Regional Consumer Banking 230 1,800Securities and Banking 223 9,259Transaction Services 1,716 1,567Brokerage and Asset Management 151 65Local Consumer Lending—Cards 121 4,560(1) Local Consumer Lending—Other is excluded from the table as there is no goodwill allocated to it.While no impairment was noted in step one of Citigroup’s LocalConsumer Lending—Cards reporting unit impairment test at July 1, 2010,goodwill present in the reporting unit may be sensitive to furtherdeterioration as the valuation of the reporting unit is particularly dependentupon economic conditions that affect consumer credit risk and behavior.Citigroup engaged the services of an independent valuation specialist to assistin the valuation of the reporting unit at July 1, 2010, using a combinationof the market approach and income approach consistent with the valuationmodel used in past practice, which considered the impact of the penalty feeprovisions associated with the Credit Card Accountability Responsibility andDisclosure Act of 2009 (CARD Act) that were implemented during 2010.Under the market approach for valuing this reporting unit, the keyassumption is the selected price multiple. The selection of the multipleconsiders the operating performance and financial condition of the LocalConsumer Lending—Cards operations as compared with those of a groupof selected publicly traded guideline companies and a group of selectedacquired companies. Among other factors, the level and expected growth inreturn on tangible equity relative to those of the guideline companies andguideline transactions is considered. Since the guideline company prices usedare on a minority interest basis, the selection of the multiple considers theguideline acquisition prices, which reflect control rights and privileges, inarriving at a multiple that reflects an appropriate control premium.For the Local Consumer Lending—Cards valuation under the incomeapproach, the assumptions used as the basis for the model include cashflows for the forecasted period, the assumptions embedded in arriving atan estimation of the terminal value and the discount rate. The cash flowsfor the forecasted period are estimated based on management’s most recentprojections available as of the testing date, giving consideration to targetedequity capital requirements based on selected public guideline companiesfor the reporting unit. In arriving at the terminal value for Local ConsumerLending—Cards, using 2013 as the terminal year, the assumptions usedinclude a long-term growth rate and a price-to-tangible book multiple basedon selected public guideline companies for the reporting unit. The discountrate is based on the reporting unit’s estimated cost of equity capital computedunder the capital asset pricing model.Embedded in the key assumptions underlying the valuation model,described above, is the inherent uncertainty regarding the possibilitythat economic conditions may deteriorate or other events will occur thatwill impact the business model for Local Consumer Lending—Cards.While there is inherent uncertainty embedded in the assumptions used indeveloping management’s forecasts, the Company utilized a discount rate atJuly 1, 2010 that it believes reflects the risk characteristics and uncertaintyspecific to management’s forecasts and assumptions for the Local ConsumerLending—Cards reporting unit.Two primary categories of events exist—economic conditions inthe U.S. and regulatory actions—which, if they were to occur, couldnegatively affect key assumptions used in the valuation of Local ConsumerLending—Cards. Small deterioration in the assumptions used in thevaluations, in particular the discount-rate and growth-rate assumptionsused in the net income projections, could significantly affect Citigroup’simpairment evaluation and, hence, results. If the future were to differadversely from management’s best estimate of key economic assumptions,and associated cash flows were to decrease by a small margin, Citi couldpotentially experience future material impairment charges with respect to$4,560 million of goodwill remaining in the Local Consumer Lending—Cards reporting unit. Any such charges, by themselves, would not negativelyaffect Citi’s Tier 1 and Total Capital regulatory ratios, Tier 1 Common ratio,its Tangible Common Equity or Citi’s liquidity position.224