119 ANNUAL REPORT 2010 More detailed cash flow modeling was performed on issuances  identified through stress testing as being most at risk for  payment interruption, such as issuances with a  disproportionate number of borrowers from states experiencing  significant declines in home values. Key assumptions used in  the models are projected defaults, loss severities and  prepayments. Each of these key assumptions varies greatly  based on the significantly diverse characteristics of the current  collateral pool for each security. Loan-to-value, loan size and  borrower credit history are some of the key characteristics used  to determine the level of assumption that is utilized. Defaults  were estimated by identifying the loans that are in various  delinquency buckets and defaulting a certain percentage of  them over the near-term and long-term. Assumed defaults  on delinquent loans are dependent on the specific security’s  collateral attributes and historical performance. Loss severity  assumptions were determined by observing historical rates  from broader market data, while being adjusted for specific  pool performance, collateral type, mortgage insurance and  estimated loan modifications. Prepayments were estimated  by examining historical averages of prepayment activity on  the underlying collateral. Once the entire pool is modelled,  the results are analyzed by the internal asset specialist to  determine whether or not particular tranches or holdings are  at risk for not collecting all contractual cash flows taking into  account the seniority and other terms of the tranches held.  AEGON impaired its particular tranche to fair value where it  would not be able to receive all contractual cash flows.  Objective evidence of impairment of an investment in an equity  instrument classified as available for sale includes information  about significant changes with an adverse effect that have  taken place in the technological, market, economic or legal  environment in which the issuer operates, and indicates that  the cost of the investment in the equity instrument may not be  recovered. A significant or prolonged decline in the fair value  of an investment in an equity instrument below its cost is also  objective evidence of impairment.  Goodwill is reviewed and tested for impairment under a fair  value approach. Goodwill must be tested for impairment at least  annually or more frequently as a result of an event or change in  circumstances that would indicate an impairment charge may  be necessary. The recoverable amount is the higher of the value  in use and fair value less costs to sell for a cash-generating unit.  Impairment testing requires the determination of the value in  use or fair value less costs for each of AEGON’s identified cash  generating units.  The valuation utilized the best available information, including  assumptions and projections considered reasonable and  supportable by management. The assumptions used in the  valuation involve significant judgments and estimates. Refer  note 6 for more details. The liabilities or assets recognized in the balance sheet in  respect of defined benefit plans is the difference between the  present value of the projected defined benefit obligation at the  balance sheet date and the fair value of plan assets, together  with adjustments for unrecognized actuarial gains or losses  and past service costs. The present value of the defined benefit  obligation is determined by discounting the estimated future  cash flows using interest rates of high-quality corporate bonds  that are denominated in the currency in which the benefits will  be paid and that have terms to maturity that approximate the  terms of the related pension liability. Actuarial assumptions  used in the measurement of the liability include the discount  rate, the expected return on plan assets, estimated future  salary increases and estimated future pension increases. To the  extent that actual experience deviates from these assumptions,  the valuation of defined benefit plans and the level of pension  expenses recognized in the future may be affected. Deferred tax assets are established for the tax benefit related  to deductible temporary differences, carry forwards of unused  tax losses and carry forwards of unused tax credits when in  the judgment of management it is more likely than not that  AEGON will receive the tax benefits. Since there is no absolute  assurance that these assets will ultimately be realized,  management reviews AEGON’s deferred tax positions  periodically to determine if it is more likely than not that the  assets will be realized. Periodic reviews include, among other  things, the nature and amount of the taxable income and  deductible expenses, the expected timing when certain assets  will be used or liabilities will be required to be reported and the  reliability of historical profitability of businesses expected to  provide future earnings. Furthermore, management considers  tax-planning strategies it can utilize to increase the likelihood  that the tax assets will be realized. These strategies are also  considered in the periodic reviews.  SHARPENING OUR FOCUS VALUATION OF DEFINED BENEFIT PLANS RECOGNITION OF DEFERRED TAX ASSETS Shares GOODWILL