Goodwill and other intangiblesGoodwill and other intangibles

Goodwill and other intangibles

1. Subject to paragraph 18 of this Attachment, a private health insurer must deduct the following, net of any associated deferred tax assets and deferred tax liabilities that would be extinguished if the assets involved become impaired or derecognised under Australian Accounting Standards:
   1. goodwill and any other intangible assets[15] arising from an acquisition, net of adjustments to profit or loss reflecting any changes arising from ‘impairment’ of goodwill; and
   2. other intangible assets net of adjustments to profit or loss reflecting amortisation and impairment. Intangible assets are as defined in Australian Accounting Standards and include capitalised expenses and capitalised transaction costs. These include, but are not limited to:
      1. costs associated with debt raisings and other similar transaction-related costs that are capitalised as an asset;
      2. costs associated with issuing capital instruments if not already charged to profit and loss;
      3. capitalised information technology software costs; and
      4. other capitalised expenses including capitalised expenses of a general nature such as strategic business development initiatives. These include, in addition to the above listed items, other forms of transaction costs and like costs that are required to be deferred/capitalised and amortised as part of the measurement of assets and liabilities under Australian Accounting Standards.
2. The balance of any transaction costs and like items that are capitalised and deferred as an asset must be netted off against the balance of any income deferred as a liability relating to the products giving rise to the capitalised transaction costs (i.e. only deferred costs and income in particular product portfolios may be netted). Any net balance of capitalised transaction costs must be deducted from Common Equity Tier 1 Capital in accordance with this Prudential Standard. Any surplus of fee income received from sources other than the insurer’s health insurance policies over deferred costs may be included in Common Equity Tier 1 Capital provided the fee income received satisfies the criteria in paragraph 35 of this Prudential Standard. Otherwise, up-front fee income received from sources other than the insurer’s health insurance policies must not be added to capital.
3. An investment in a subsidiary, joint venture or associate that:
   1. is operationally independent;
   2. represents a genuine arm’s length investment;
   3. is not subject to prudential capital requirements; and
   4. does not undertake ‘health insurance business’ or business related to health insurance business;