Dominion Power 2003 Annual Report Download - page 75

73.Dominion 2003
13. Goodwill and Intangible Assets
The changes in the carrying amount of goodwill during 2003 are presented below:
Corporate
Dominion Dominion Dominion Dominion and
Generation Energy Delivery E&P Other Total
(millions)
Balance at December 31, 2002 $1,472 $585 $1,344 $879 $ 21 $4,301
Acquisition of controlling interest in previously unconsolidated
telecom and DCI businesses ———— 87 87
Telecom impairment loss ———— (60) (60)
DCI impairment losses ———— (18) (18)
Purchase accounting adjustments — 2 —— (12) (10)
Reallocation of goodwill due to transfer of electric transmission
operations from Dominion Delivery to Dominion Energy — 168 (168) ———
Reallocation of goodwill due to transfer of Dominion Retail
operations from Dominion Energy to Dominion Delivery — (7) 7 ———
Balance at December 31, 2003 $1,472 $748 $1,183 $879 $ 18 $4,300
Goodwill Impairments
In 2003, Dominion recorded goodwill impairment charges of
$18 million related to the DCI reporting unit. During 2003, a DCI
subsidiary received an unfavorable arbitration ruling that resulted
in lower margins for services provided. Another DCI subsidiary
experienced delays in expanding marketing and stabilizing pro-
duction efforts. As a result of these unfavorable developments,
Dominion performed goodwill impairment tests, using discounted
cash flow analyses, which indicated that the goodwill associated
with those entities was impaired.
Also in 2003, as described in Note 9, Dominion purchased
the remaining equity interest in DFV for $62 million, including
$2 million for accrued dividends. This transaction was accounted
for as a purchase of a minority interest and $60 million was rec-
ognized as goodwill and immediately impaired. The purchase
enabled Dominion to proceed with its strategy to sell DTI.
In 2002, Dominion recorded a goodwill impairment charge of
$13 million related to a DCI subsidiary that received an unfavor-
able arbitration ruling that affected its ability to recover disputed
amounts for past and future performance under a contract with a
major customer. Dominion performed a goodwill impairment test,
using discounted cash flow analysis, which indicated that the
goodwill was impaired.
Other Intangible Assets
All of Dominion’s intangible assets, other than goodwill, are sub-
ject to amortization. Amortization expense for intangible assets
was $54 million, $53 million and $44 million for 2003, 2002
and 2001, respectively. There were no material acquisitions of
intangible assets during 2003 and 2002. Intangible assets are
included in other assets on the Consolidated Balance Sheets. The
components of intangible assets at December 31, 2003 and
2002 were as follows:
2003 2002
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization
(millions)
Software and
software licenses $543 $237 $464 $200
Other 73 23 68 19
Total $616 $260 $532 $219
Annual amortization expense for intangible assets is estimated
to be $54 million for 2004, $49 million for 2005, $43 million for
2006, $36 million for 2007 and $24 million for 2008.