Goodwill

The changes in the carrying amount of goodwill for the years ended December 31, 2016 and 2015 are as follows:



	Beginning balance at January 1, 2016							Ending balance at December 31, 2016
	Gross goodwill amount	Accumulated impairment		Net goodwill amount	Impairment	Foreign currency translation adjustment		Gross goodwill amount	Accumulated impairment		Net goodwill amount
Year ended December 31, 2016	$'000	$'000		$'000	$'000	$'000		$'000	$'000		$'000

Owned hotels:
Europe	64,263	(14,202	)	50,061	—	196		64,459	(14,202	)	50,257
North America	66,101	(16,110	)	49,991	—	—		66,101	(16,110	)	49,991
Rest of world	19,975	(13,149	)	6,826	—	606		20,581	(13,149	)	7,432
Owned trains and cruises	7,780	(662	)	7,118	—	(1,455	)	6,325	(662	)	5,663

Total	158,119	(44,123	)	113,996	—	(653	)	157,466	(44,123	)	113,343



	Beginning balance at January 1, 2015								Ending balance at December 31, 2015
	Gross goodwill amount	Accumulated impairment		Net goodwill amount	Impairment		Foreign currency translation adjustment		Gross goodwill amount	Accumulated impairment		Net goodwill amount
Year ended December 31, 2015	$'000	$'000		$'000	$'000		$'000		$'000	$'000		$'000

Owned hotels:
Europe	71,292	(10,104	)	61,188	(4,098	)	(7,029	)	64,263	(14,202	)	50,061
North America	66,101	(16,110	)	49,991	—		—		66,101	(16,110	)	49,991
Rest of world	21,705	(8,113	)	13,592	(5,036	)	(1,730	)	19,975	(13,149	)	6,826
Owned trains and cruises	7,873	—		7,873	(662	)	(93	)	7,780	(662	)	7,118

Total	166,971	(34,327	)	132,644	(9,796	)	(8,852	)	158,119	(44,123	)	113,996

Belmond's annual impairment test date is October 1, when all reporting units with goodwill balances are reviewed for impairment. The first step of the impairment test compares the carrying value of each reporting unit to its fair value to determine if an impairment is indicated. The fair value of a reporting unit is determined using internally developed discounted future cash flow models, which include input from external valuation experts to provide discount and long term growth rates. If an impairment is indicated, the second step of the impairment test compares the implied fair value of the reporting unit's goodwill to its carrying amount. An impairment loss is measured as the excess of the carrying value of a reporting unit's goodwill over its implied fair value.

There were no impairments to goodwill in the year ended December 31, 2016.

In the three months ended December 31, 2016, Belmond considered whether the declining financial performance of '21' Club caused by stock market volatility and neighboring construction works indicated that it was more likely than not that the fair value of '21' Club was less than its carrying value. Under the first step of the goodwill impairment test, the fair value of '21' Club was approximately 3% in excess of its carrying value. '21' Club had a goodwill balance of $9,596,000 at December 31, 2016. Factors that could reasonably be expected to potentially have an adverse effect on the fair value of the reporting unit include the future operating projections of the restaurant, volatility in debt or equity markets that could result in changes to the discount rate, political instability in the region or changes in future travel patterns.

Also, in the three months ended December 31, 2016, Belmond considered whether the difficult economic condition in Russia indicated that it was more likely than not that the fair value of Belmond Grand Hotel Europe was less than its carrying value. Under the first step of the goodwill impairment test, the fair value of Belmond Grand Hotel Europe was approximately 21% in excess of its carrying value. Belmond Grand Hotel Europe had a goodwill balance of $9,199,000 at December 31, 2016. Factors that could reasonably be expected to potentially have an adverse effect on the fair value of the reporting unit include the future operating projections of the hotel, volatility in debt or equity markets that could result in changes to the discount rate, economic sanctions and the timing and extent of recovery in the Russian economy.

During the year ended December 31, 2015, the following non-cash goodwill impairment charges were identified and recorded:

•

An impairment charge of $4,098,000 at Belmond Grand Hotel Europe. Belmond determined that this impairment was triggered by the deterioration of the Russian economic environment which commenced in the second half of 2014 and failed to improve significantly in 2015 under economic sanctions. The continued sanctions and lack of economic recovery led management to reconsider its estimates for future profitability of the business, including future growth in ADR and occupancy rates and the related discount rates.

•

An impairment charge of $3,581,000 at Belmond Jimbaran Puri. Belmond determined that this impairment was triggered by declining performance over a number of periods, caused in part by the stronger U.S. dollar and increased relative expense of the region for European travelers in particular. Further weakness in performance that continued into the peak season in the second quarter led management to reconsider its estimates for future profitability of the business, including future growth in ADR and occupancy rates and the related discount rates.

•

An impairment charge of $1,455,000 at Belmond La Résidence Phou Vao. Belmond determined that this impairment was triggered by the declining popularity of the destination, increased relative expense of the region for European travelers as well as increased competition from smaller independent operators. After a weak winter period, the improvement in performance in 2015 was not as strong as expected, leading management to reconsider its estimates for future profitability of the business, including future growth in ADR and occupancy rates and the related discount rates.

•

An impairment charge of $662,000 at Belmond Northern Belle. Belmond determined that this impairment was triggered by declining performance caused by a reduction in passenger numbers sourced mainly from regional markets in the U.K. Continued softness in passenger numbers over the key summer period led management to reconsider its estimates for future profitability of the business, including future growth in ticket prices and passenger numbers and the related discount rates.

There were no impairments to goodwill in the year ended December 31, 2014.