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52 CVS CAREMARK
Notes to Consolidated Financial Statements
Indefi nitely-lived intangible assets are tested by comparing
the estimated fair value of the asset to its carrying value. If the
carrying value of the asset exceeds its estimated fair value, an
impairment loss is recognized and the asset is written down to
its estimated fair value.
The carrying amount of goodwill was $25.5 billion and
$23.9 billion as of December 31, 2008 and December 29,
2007, respectively. During 2008, goodwill increased primarily
due to the Longs Acquisition.
The carrying amount of indefi nitely-lived assets was $6.4 billion
as of December 31, 2008 and December 29, 2007.
Intangible assets with fi nite useful lives are amortized over
their estimated useful lives. The increase in the gross carrying
amount of the Company’s amortizable intangible assets was
primarily due to the preliminary purchase price allocations
(which may change and the result of such changes, if any,
may be material) the Company recorded in connection with the
Longs Acquisition. Amortization expense for intangible assets
totaled $405.0 million in 2008, $344.1 million in 2007 and
$161.2 million in 2006. The anticipated annual amortization
expense for these intangible assets is $421.4 million in 2009,
$408.8 million in 2010, $399.0 million in 2011, $376.3 million
in 2012 and $355.0 million in 2013.
GOODWILL AND OTHER INTANGIBLES
The Company accounts for goodwill and intangibles under
SFAS No. 142, “Goodwill and Other Intangible Assets.” Under
SFAS No. 142, goodwill and other indefi nitely-lived assets are not
amortized, but are subject to annual impairment reviews, or more
frequent reviews if events or circumstances indicate an impair-
ment may exist.
When evaluating goodwill for potential impairment, the Company
fi rst compares the fair value of the reporting unit, based on
estimated future discounted cash fl ows, to its carrying amount.
If the estimated fair value of the reporting unit is less than its
carrying amount, an impairment loss calculation is prepared. The
impairment loss calculation compares the implied fair value of a
reporting unit’s goodwill with the carrying amount of its goodwill.
If the carrying amount of the goodwill exceeds the implied fair
value, an impairment loss is recognized in an amount equal to the
excess. During the third quarter of 2008, the Company performed
its required annual goodwill impairment tests. The Company
concluded there were no goodwill impairments as of the testing
date or December 31, 2008.
Following is a summary of the Company’s intangible assets as of the respective balance sheet dates:
Dec. 31, 2008 Dec. 29, 2007
Gross Gross
Carrying Accumulated Carrying Accumulated
In millions Amount Amortization Amount Amortization
Trademarks (indefi nitely-lived) $ 6,398.0 $ – $ 6,398.0 $ –
Customer contracts and relationships and Covenants
not to compete 4,748.8 (1,240.4) 4,444.1 (876.9)
Favorable leases and Other 719.3 (179.5) 623.0 (158.6)
$ 11,866.1 $ (1,419.9) $ 11,465.1 $ (1,035.5)
NO 3