Strategic Shareholder Climate and Risk Financial Financial Barclays PLC 476 report information sustainability report Governance review review statements Annual Report 2022 Notes to the financial statements (continued) Assets at amortised cost and other investments Outcome of goodwill and intangibles review The Personal Banking and Business Banking CGUs carry the majority of the Group’s goodwill balance, predominantly as a consequence of the Woolwich acquisition. The goodwill within Personal Banking was £2,752m (2021: £2,752m), of which £2,501m (2021: £2,501m) was attributable to Woolwich, and within Business Banking was £629m (2021: £629m), fully attributable to Woolwich. The recoverable amount for both Personal Banking and Business Banking have increased in comparison to the 2021 impairment review, reflective of improvements in the interest rate and macroeconomic outlook. The largest portion of the Group’s intangible assets sit within the Cards and Payments CGU, part of Barclays International with an allocation of £1,531m (2021: £1,351m). Based on management’s plans and assumptions the value in use exceeds the carrying value of the CGUs and no impairment has been indicated. The outcome of the impairment review for Personal Banking, Business Banking and Cards and Payments are set out below: Value in use Value in use exceeding carrying exceeding carrying Cash generating unit Tangible equity Goodwill Intangibles Carrying value Value in use value value 2021 £m £m £m £m £m £m £m 5,091 2,752 928 8,771 Personal Banking 13,438 4,667 1,489 1,549 629 216 2,394 Business Banking 9,017 6,623 3,623 Cards and Payments 3,780 229 1,531 5,540 7,138 1,598 1,025 Total 10,420 3,610 2,675 16,705 29,593 12,888 6,137 Sensitivity of key judgements The CGUs are sensitive to possible adverse changes in the key assumptions that support the recoverable amount: Cash flows: The medium-term plans used to determine the cash flows used in the VIU calculation rely on macroeconomic forecasts, including interest rates, GDP and unemployment, and forecast levels of market and client activity. Interest rate assumptions impact planned cash flows from both customer income and structural hedge contributions and therefore cash flow expectations are highly sensitive to movements in the yield curve. The cash flows also contain assumptions with regard to the prudential and financial conduct regulatory environment which may be subject to change. Given the current level of economic uncertainty, a 10% reduction in cash flows has been provided to show the sensitivity of the outcome to a change in these key assumptions. Discount rate: The discount rate should reflect the market risk-free rate adjusted for the inherent risks of the business it is applied to. Management have identified discount rates for comparable businesses and consider these to be a reasonable estimate of a suitable market rate for the profile of the business unit being tested. The risk that these discount rates may not be appropriate is quantified below and shows the impact of a 100 bps change in the discount rate. Terminal growth rate: The terminal growth rate is used to estimate the cash flows into perpetuity based on the expected longevity of the CGUs' businesses. The terminal growth rate is sensitive to uncertainties in the macroeconomic environment. The risk that using inflation data may not be appropriate for its determination is quantified below and shows the impact of 100 bps change in the terminal growth rate. Allocated capital rate: Tangible equity is allocated based on the level of risk weighted assets (RWAs) and capital required to be deployed in the CGU which is dependent on the relative risk of businesses. The capital ratio used in determining the level of tangible equity allocated to the CGU and its capital cash flows could move over time. The impact of a 50bps increase in capital ratio is quantified below. The sensitivity of the value in use to key judgements in the calculations is set out below: Reduction in headroom Change required to reduce headroom to zero Value in 100 bps 100 bps use increase decrease 50 bps 10% exceeding Terminal in the in terminal increase to reduction in Terminal Allocated Carrying Value in carrying Discount growth discount growth allocated forecasted Discount growth capital Cash Cash generating unit value use value rate rate rate rate capital rate cash flows rate rate rate flows £m £m £m % % £m £m £m £m % % % % Personal Banking 8,771 13,438 4,667 16.5 2.0 (944) (596) (279) (1,493) 6.9 (14.8) 8.4 (31.3) Cards and Payments 5,540 7,138 1,598 15.9 2.0 (724) (515) (287) (1,005) 2.5 (3.7) 2.8 (15.9) Total 14,311 20,576 6,265