Company: HBCYF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001089113-25-000040
Chunk: 526

Company: HSBC HOLDINGS PLC
Filing Date: 2025-02-20
Form: 20-F
Chunk 526
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 a change in the estimate used to determine the relevant recoverable amount since the last

impairment loss was recognised, and to the extent that it does not increase the carrying amount above that had no impairment loss been

previously recognised.

Critical estimates and judgements

| Investments in subsidiaries are tested for impairment when there is an indication that the investment may be impaired, which involves estimations of value in usereflecting management’s best estimate of the future cash flows of the investment and the rates used to discount these cash flows, both of which are subject touncertain factors as follows:                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| Judgements                                                                                                                                                                                                                                                                                                                                                                                                                                              | Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| –The accuracy of forecast cash flows is subject to a highdegree of uncertainty in volatile market conditions.Where such circumstances are determined to exist,management re-tests for impairment or reversal morefrequently than once a year when indicators exist. Thisensures that the assumptions on which the cash flowforecasts are based continue to reflect current marketconditions and management’s best estimate of futurebusiness prospects. | –The future cash flows of each investment are sensitive to the cash flows projected for the periodsfor which detailed forecasts are available and to assumptions regarding the long-term pattern ofsustainable cash flows thereafter. Forecasts are compared with actual performance and verifiableeconomic data, but they reflect management’s view of future business prospects at the time of theassessment.–The rates used to discount future expected cash flows can have a significant effect on theirvaluation, and are based on the costs of equity assigned to the investment. The cost of equitypercentage is generally derived from a capital asset pricing model and the market implied cost ofequity, which incorporates inputs reflecting a number of financial and economic variables, includingthe risk-free interest rate in the country concerned and a premium for the risk of the business beingevaluated. These variables are subject to fluctuations in external market rates and economicconditions beyond management’s control.–Key assumptions used in estimating impairment in subsidiaries and their reversal where relevant aredescribed in Note19. |

Goodwill

Goodwill is allocated to cash-generating units (’CGUs’) for the purpose of impairment testing, which is undertaken at the lowest level at which

goodwill is monitored for internal management purposes. HSBC’s CGUs are based on its main legal entities subdivided by global business,

except for Global Banking and Markets, for which goodwill is monitored on a global basis.

Impairment testing is performed at least