18. Intangible assets

18.1 Goodwill

The breakdown of the balance under this heading in the accompanying consolidated balance sheets, according to the cash-generating units (CGUs), to which the Goodwill are allocated for purposes of impairment testing, is as follows:

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Goodwill. Breakdown by CGU and Changes of the year 2015	Millions of euros
	Balance at the Beginning	Additions	Exchange Difference	Impairment	Rest	Balance at the End
The United States	4,767	12	549	-	-	5,328
Turkey	-	672	(50)	-	-	622
Mexico	638	-	(35)	-	-	602
Colombia	208	-	(31)	-	-	176
Chile	65	-	(3)	-	-	62
Rest	20	-	(1)	-	-	20
Total	5,697	684	429	-	-	6,811

The change in 2015 is mainly as a result of the full consolidation of Garanti since the date of effective control (see Note 3) assigned to the CGU of Turkey and exchange differences due to the appreciation of the US Dollar against the euro and the depreciation of the other currencies.

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Goodwill. Breakdown by CGU and Changes of the year 2014	Millions of euros
	Balance at the Beginning	Additions	Exchange Difference	Impairment	Rest	Balance at the End
The United States	4,133	65	570	-	(1)	4,767
Mexico	630	-	7	-	-	638
Colombia	227	-	(19)	-	-	208
Chile	66	-	(1)	-	-	65
Rest	12	8	-	-	-	20
Total	5,069	73	557	-	(1)	5,697

(*) The change depicted in the above table corresponded to the acquisition of Simple. Download Excel

Goodwill. Breakdown by CGU and Changes of the year 2013	Millions of euros
	Balance at the Beginning	Additions	Exchange Difference	Impairment	Rest	Balance at the End
The United States	4.320	-	(187)	-	-	4.133
Mexico	663	-	(33)	-	-	630
Colombia	259	-	(32)	-	-	227
Chile	175	-	(9)	-	(100)	65
Rest	13	-	(1)	-	-	12
Total	5.430	-	(262)	-	(100)	5.069

(*) The change depicted in the above table corresponded to the sale of AFP Provida (see Note 3).

Impairment Test

As described in Note 2.2.8, the cash-generating units (CGUs) to which goodwill has been allocated are periodically tested for impairment by including the allocated goodwill in their carrying amount. This analysis is performed at least annually and whenever there is any indication of impairment. As of December 31, 2015, no indicators of impairment have been identified in any of the main cash-generating units.

Both the CGU’s fair values in the United States and the fair values assigned to its assets and liabilities had been based on the estimates and assumptions that the Group’s Management has deemed most likely given the circumstances. However, some changes to the valuation assumptions used could result in differences in the impairment test result.

Three key hypotheses are used when calculating the impairment test. They those to which the amount of the recoverable value is most sensitive:

• The forecast cash flows estimated by the Group's management, and based on the latest available budgets for the next 5 years.
• The constant sustainable growth rate for extrapolating cash flows, starting in the fifth year (2020), beyond the period covered by the budgets or forecasts.
• The discount rate on future cash flows, which coincides with the cost of capital assigned to each CGU, and which consists of a risk-free rate plus a premium that reflects the inherent risk of each of the businesses evaluated.

The focus used by the Group's management to determine the values of the hypotheses is based both on its projections and past experience. These values are uniform and use external sources of information. At the same time, the valuations of the most significant goodwill have in general been reviewed by independent experts (not the Group's external auditors) who apply different valuation methods according to each type of asset and liability

As of December 31, 2015, 2014 and 2013, no impairment was detected in any of the main cash-generating units.

The Group’s most significant goodwill corresponds to the CGU in the United States, the main significant hypotheses used in the impairment test of this mentioned CGU are:

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Impairment test hypotheses CGU Goodwill in the United States	Millions of euros
	2015	2014	2013
Rate of discount	9.8%	10.0%	10.8%
Rate of increase	4.0%	4.0%	4.0%

Given the potential growth of the sector, in accordance with paragraph 33 of IAS 36, as of December 31, 2015, 2014 and 2013 the Group used a steady growth rate of 4% based on the real GDP growth rate of the United States and expected inflation. This 4% rate is less than the historical average of the past 30 years of the nominal GDP rate of the United States and lower than the real GDP growth forecasted by the IMF. In addition, the Group has a greater relative weight of its business in Texas where it is expected (according to BBVA Research forecasts) that the economic recovery will be better than in the rest of the country.

The assumptions with a greater relative weight and whose volatility could affect more in determining the present value of the cash flows starting on the fifth year are the discount rate and the growth rate. Below is shown the increased (or decreased) amount of the recoverable amount as a result of a reasonable variation (in basic points) of each of the key assumptions:

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Sensitivity analysis for main hypotheses	Millions of euros
	Impact of an increase of 50 basis points (*)	Impact of a decrease of 50 basis points (*)
Rate of discount	(1,117)	1,329
Rate of increase	803	(675)

(*) Based on historical changes, the use of 50 basis points to calculate the sensitivity analysis would be a reasonable variation with respect to the observed variations over the last five years (32 basis points).

Another assumption used, and with a high impact on the impairment test, is the budgets of the CGU and specifically the effect that changes in interest rates have on cash flows. In case of a rise in interest rates in the United States, net interest income would be positively affected and, therefore, the recoverable amount of the CGU would increase.

Goodwill in business combinations

Catalunya Banc

As stated in Note 3, in the year ended December 31, 2015 the Group acquired 98.4% of the share capital of the Catalunya Banc.

Shown below are details of the carrying amount of the consolidated assets and liabilities of Catalunya Banc prior to its acquisition and the corresponding fair values, gross of tax, which have been estimated in accordance with the IFRS-3 acquisition method.

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Valuation and calculation of badwill for the acquisition of stake in Catalunya Banc	Millions of euros
	Carrying Amount	Fair Value
Acquisition cost (A)	-	1,165
Cash	616	616
Held for Trading	341	341
Other Financial Assets designated at Fair Value Through Profit or Loss	-	-
Available for Sale	1,845	1,853
Loans and receivables	37,509	36,766
Held to Maturity Investments (*)	-	-
Fair Value Changes of the Hedged items in Portfolio hedges of interest rate risk	23	23
Hedging Derivatives	845	845
Non-current assets held for sale	274	193
Investments in entities accounted for Using the equity method	209	293
Tangible assets	908	626
Intangible assets	7	129
Other assets	581	498
Financial Liabilities Held for Trading	(332)	(332)
Financial liabilities at Amortized Cost	(41,271)	(41,501)
Fair Value Changes of the Hedged items in Portfolio hedges of interest rate risk	(490)	(490)
Hedging Derivatives	(535)	(535)
Provisions	(1,248)	(1,667)
Other liabilities	(84)	(84)
Deferred tax	3,312	3,630
Total fair value of assets and liabilities acquiered (B)	-	1,205
Non controlling Interest Catanlunya Banc Group (**) (C)	2	2
Non controlling Interest after purchase (D)	-	12
Badwill (A)-(B)+(C )+(D)	-	26

(*) After the purchase, it has been reclassified under the heading “Available-for-Sale” (**) It corresponds to non-controlling interests that Catalunya Banc held, prior to integration in the BBVA Group

Because the resulting goodwill was negative, a gain was recognized in the accompanying consolidated income statement for 2015 under the heading “Badwill” (see Note 2.2.7).

The calculation of this amount is subject to change, since the estimate of all the fair values is being reviewed and, according to IFRS-3, they may be modified during a period of one year from the acquisition date (April 2015). However, the Group does not expect any significant changes in this amount.

Garanti Bank

As stated in Note 3, in the year ended December 31, 2015 the Group acquired 14.89% of the share capital of the Garanti Bank.

Shown below are details of the carrying amount of the consolidated assets and liabilities of Garanti Bank prior to its acquisition and the corresponding fair values, gross of tax, which have been estimated in accordance with the IFRS-3 acquisition method.

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	Millions of euros
Valuation and calculation of goodwill in Garanti Bank	Carrying Amount	Fair Value
Acquisition cost (A)	-	5,044
Cash	8,915	8,915
Held for Trading	419	419
Available for Sale	14,618	14,773
Loans and receivables	58,495	58,056
Non-current assets held for sale	-	3
Investments in entities accounted for Using the equity method	14	21
Tangible assets	785	1,399
Intangible assets	11	1,542
Other assets	3,715	3,651
Financial liabilities at Amortized Cost	(70,920)	(70,920)
Provisions	(394)	(698)
Other liabilities	(6,418)	(6,418)
Deferred tax	263	109
Total fair value of assets and liabilities acquiered (B)	-	10,852
Non controlling Interest Garanti Group (*) (C)	5,669	5,669
Non controlling Interest after purchase (D)	-	811
Goodwill (A)-(B)+(C )+(D)	-	672

The estimate as of December 31, 2015, in accordance with the acquisition method, which compares the fair value assigned to the acquired assets and liabilities of Garanti along with the intangible assets identifies, as well as the cash payment carried out by the Group related to the transaction generates a goodwill.

The calculation of this amount is subject to change, since the estimate of all the fair values is being reviewed and, according to IFRS-3, they may be modified during a period of one year from the acquisition date (July 2015). However, the Group does not expect any significant changes in this amount.

18.2 Other intangible assets

The breakdown of the balance and changes of this heading in the accompanying consolidated balance sheets, according to the nature of the related items, is as follows:

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	Millions of euros
Other intangible assets	2015	2014	2013
Computer software acquisition expenses (*)	2,034	1,519	1,480
Other deferred charges (*)	632	22	20
Other intangible assets (*)	801	134	199
Impairment	(4)	(2)	(9)
Total	3,464	1,673	1,690

(*) In year 2015, the increase registered in these headings is mainly due to the acquisition of Catalunya Banc Group and Garanti Group (see Note 18.1). Download Excel

		Millions of euros
Other Intangible Assets. Changes Over the Period	Notes	2015	2014	2013
Balance at the beginning		1,673	1,690	1,702
Acquisition of subsidiaries in the year		1,793	-	-
Additions		571	467	543
Amortization in the year	44	(631)	(535)	(514)
Exchange differences and other		62	59	(33)
Impairment	47	(4)	(8)	(9)
Balance at the end		3,464	1,673	1,690

During the year ended December 31, 2015, the variation of “Other intangible assets” is due to the integration of Catalunya Banc. The amortization amounts included under this heading for the years ended December 31, 2015, 2014 and 2013 are detailed in Note 44.

As of December 31, 2015, the balance of fully amortized intangible assets that remained in use was € 1,238 million, while their recoverable value is not significant.