Boeing 2009 Annual Report Download - page 58

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amount of the impairment. In this process, a fair value for goodwill is estimated, based in part on the
fair value of the operations, and is compared to its carrying value. The shortfall of the fair value below
carrying value represents the amount of goodwill impairment.
We estimate the fair values of the related operations using discounted cash flows. Forecasts of future
cash flows are based on our best estimate of future sales and operating costs, based primarily on
existing firm orders, expected future orders, contracts with suppliers, labor agreements, and general
market conditions. Changes in these forecasts could significantly change the amount of impairment
recorded, if any.
The cash flow forecasts are adjusted by an appropriate discount rate derived from our market
capitalization plus a suitable control premium at the date of evaluation. Therefore, changes in the stock
price may also affect the amount of impairment recorded, if any.
Changes in our forecasts or decreases in the value of our common stock could cause book values of
certain operations to exceed their fair values which may result in goodwill impairment charges in future
periods. A 10% decrease in the estimated fair value of any of our operations would have no impact on
the carrying value of goodwill.
As of December 31, 2009 and 2008, we had $499 million of indefinite-lived intangible assets related to
the Jeppesen and Aviall brand and trade names acquired in business combinations. We test these
intangibles for impairment by comparing their carrying value to current projections of discounted cash
flows attributable to the brand and trade names. Any excess carrying value over the amount of
discounted cash flows represents the amount of the impairment. A 10% decrease in the discounted
cash flows would have no impact on the carrying value of these indefinite-lived intangible assets.
Postretirement Plans
Substantially all our employees are covered by defined benefit pension plans. We also have other
postretirement benefits consisting principally of healthcare coverage for eligible retirees and qualifying
dependents. Accounting rules require an annual measurement of our projected obligations and plan
assets. These measurements require several assumptions. Significant assumptions include the
discount rate, the expected long-term rate of asset return, and medical trend rate (rate of growth for
medical costs). Future changes in assumptions or differences between actual and expected outcomes
can significantly affect our future annual expense, projected benefit obligations and Shareholders’
equity.
In the following table, we show the sensitivity of our pension and other postretirement benefit plan
liabilities and net periodic cost to a 25 basis point change in the discount rate as of December 31,
2009.
(dollars in millions)
Change in discount rate
Increase 25 bps
Change in discount rate
Decrease 25 bps
Pension plans
Projected benefit obligation $(1,478) $1,817
Net periodic pension cost (166) 189
Other postretirement benefit plans
Accumulated postretirement benefit obligation (163) 192
Net periodic postretirement benefit cost (12) 14
46