10. Goodwill

Goodwill31 December 201331 December 2012
Goodwill – subsidiaries 8 519 8 474
- PZU CO 5 415 5 415
- PZU Życie 60 60
- PZU Lietuva 3 044 2 999
Goodwill total 8 519 8 474

Changes in goodwill1 January – 31 December 20131 January – 31 December 2012
Gross value of goodwill – opening balance 20 451 22 039
Changes due to exchange differences (328) (1 588)
Gross value of goodwill – closing balance 20 123 20 451
Impairment losses opening balance (11 977) (13 323)
Changes in impairment losses due to exchange differences 373 1 346
Impairment losses closing balance (11 604) (11 977)
Net value of goodwill – closing balance 8 519 8 474
 

Potential impairment of goodwill

Goodwill is tested for impairment based on the assessment of the recoverable amount of individual companies. Based on the impairment test it was concluded that the recoverable amounts of goodwill of PZU CO and PZU Lietuva are not lower than their book values, hence impairment was not identified.

The recoverable amount was determined on the basis of the value in use estimated using the most recent financial plans and the following assumptions:

  • discount rate:
    • for PZU CO – 4.17% – being the yield rate for 10-year Treasury bonds; as the company’s cash flows are generated by other PZU Group entities, the risk premium adjustment has not been made;
    • for PZU Lietuva – 6.12%, of which 3.62% is the interest rate for loans maturing within more than 5 years and provided to non-financial entities, increased by the risk premium of 2.5%;
  • period for which financial forecasts were prepared by the Company’s management – 1 year for PZU CO and 2 tears (2014-2015) for PZU Lietuva;
  • the cash flows after the last period covered by the Company’s financial plan were adopted at a level equal to the cash flows in the last period covered by the above plan.

Considering the assumptions, the surplus of the recoverable amount over the carrying amount of the cash generating unit is:

  • PLN 82,412 thousand for PZU CO;
  • LTL 24,465 thousand for PZU Lietuva.

If the discount rate used is increased by 0.5 p.p., the aforementioned surpluses will decrease by:

  • PLN 15,092 thousand for PZU CO;
  • LTL 6,440 thousand for PZU Lietuva, respectively.

The maximum discount rates which do not result in a surplus of the carrying amount of investments over their recoverable amount are 10.02% for PZU CO, 8.58% for PZU Lietuva.