According to current available data and profits forecasts, BBVA estimates a potential negative adjustment in the goodwill value at its U.S. business unit. This adjustment is mainly related to the evolution of U.S. interest rates and the economic slowdown in that country. The accounting adjustment has no impact on tangible net equity, capital, or liquidity of BBVA Group, nor on its ability to distribute dividends or the amount of the dividend payment, which will be proposed to the Board of Directors for its approval.
In accordance with International Accounting Standard 36 (NIC 36), BBVA carries out an annual valuation (impairment test) of its goodwill. BBVA has informed in a Relevant Event filed with Spanish regulator CNMV that there is a potential negative adjustment in the value of the goodwill for the BBVA Group investment in the U.S. business unit. This adjustment is caused mainly by the negative evolution of U.S. interest rates, in particular during the second half of the year, which together with a slowdown of the economy, result in a lower than expected evolution in future profits, compared to previous estimates.
The estimated negative impact on the financial statements due to the goodwill adjustment for this business unit is approximately $1.5 billion. This impact -in an amount in euros calculated using the applicable exchange rate as of December 31, 2019- will be recorded in the P&L account of the financial statements for BBVA Group as of December 31, 2019, which will be submitted, in due course, to the Board of Directors, in order to prepare the annual accounts.
This accounting adjustment does not involve any cash outflow, and therefore will not impact the Group’s liquidity. It will neither affect its tangible net equity nor its capital. This adjustment will not have any impact neither on the ability to distribute dividends nor in the amount of the dividend payment which will be proposed to the Board of Directors for its approval.