Capital One 2009 Annual Report Download - page 153

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As part of the annual impairment test, the Company assessed its market capitalization based on the average market price relative to the
aggregate fair value of its reporting units and determined that any excess fair value in its reporting units at that time could be attributed
to a reasonable control premium compared to historical control premiums seen in the industry. During 2008 and early 2009, the lack
of liquidity in the financial markets and the continued economic deterioration led to a decline in market capitalization resulting in
significantly higher control premiums than what has been seen historically. Throughout 2009, the Company’s control premium has
dropped as capitalization rates have increased. We will continue to regularly monitor our market capitalization in 2010, overall
economic conditions and other events or circumstances that might result in an impairment of goodwill in the future.
During 2008, the Auto Finance reporting unit, with a $1.4 billion carrying amount of goodwill as of the testing date, failed the first
step as fair value was less than carrying amount by $909.7 million, requiring it to move to the second step of the goodwill impairment
test. Based on the results of the second step, a loss of $810.9 million ($804.4 million after tax) was recognized for the year-ended
December 31, 2008. The impairment was primarily a result of a reduced estimate of the fair value of the Auto Finance reporting unit
due to a 2008 business decisions to scale back that business
The following table provides a summary of goodwill.
Total Company
National
Lending
Local
Banking Credit Card Commercial Consumer
Other Total
Balance at December 31,
2007 .................................... $ 6,235,700 $ 6,595,040 $ — $ — $ — $ — $ 12,830,740
Impact of segment
reorganization ..................... (87,848) 87,848 — — — — —
Goodwill impairment .............. (810,876) — — — — — (810,876)
Other adjustments ................... — (21,700) — — — — (21,700)
Foreign currency translation ... (33,677) — — — — — (33,677)
Balance at December 31,
2008 .................................... $ 5,303,299 $ 6,661,188 $ — $ — $ — $ — $ 11,964,487
Total Company
National
Lending
Local
Banking
Credit Card Commercial Consumer Other (1) Total
Balance at
December 31,
2008 ...................... $ 5,303,299 $ 6,661,188 $ — $ — $ — $ — $ 11,964,487
Other adjustments ..... 8,479 ( 4 ) 1,105 (2,587) — — 6,993
Acquisition ................ — — — — — 1,624,888 1,624,888
Segment
reorganization ....... (5,311,778 ) (6,661,184 ) 4,692,266 4,320,822 4,584,762 (1,624,888) —
Balance at
December 31,
2009 ...................... $ — $ — $ 4,693,371 $ 4,318,235 $ 4,584,762 $ — $ 13,596,368
(1) Goodwill attributed to the Chevy Chase Bank acquisition was initially recorded in the Other category until the segment
reorganization.
In connection with the acquisition of Chevy Chase Bank, the Company recorded intangible assets of $278.3 million that consisted of
core deposit intangibles, trust intangibles, lease intangibles, and other intangibles, which are subject to amortization. The core deposit
and trust intangibles reflect the estimated value of deposit and trust relationships. The lease intangibles reflect the difference between
the contractual obligation under current lease contracts and the fair market value of the lease contracts at the acquisition date. The
other intangible items relate to customer lists and brokerage relationships.