Fluor 2013 Annual Report Download - page 109

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FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
implied fair value of reporting unit goodwill with the carrying amount of the reporting unit’s goodwill. If
the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an
impairment loss is recognized. During 2013, the company completed its annual goodwill impairment test in
the first quarter and quantitatively determined that none of the goodwill was impaired because the fair
value of each reporting unit substantially exceeded its carrying amount. Goodwill for each of the
company’s segments is shown in ‘‘15. Operations by Business Segment and Geographical Area.’’
In the first quarter of 2013, the company adopted Accounting Standards Update (‘‘ASU’’) 2012-02,
‘‘Testing Indefinite-Lived Intangible Assets for Impairment.’’ ASU 2012-02 allows entities testing an
indefinite-lived intangible asset for impairment the option of performing a qualitative assessment before
calculating the fair value of the asset. If entities determine, on the basis of qualitative factors, that the fair
value of the indefinite-lived intangible asset is, more likely than not, greater than the carrying amount, a
quantitative calculation would not be needed.
The company had intangible assets with a carrying value of $24 million and $21 million as of
December 31, 2013 and 2012, respectively. Intangible assets with indefinite lives are not amortized but are
subject to annual impairment tests. Interim testing for impairment is performed if indicators of potential
impairment exist. An intangible asset with an indefinite life is impaired if its carrying value exceeds its fair
value. As of December 31, 2013, none of the company’s intangible assets with indefinite lives were
impaired. Intangible assets with finite lives are amortized on a straight-line basis over the useful lives of
those assets, ranging from one year to ten years.
Income Taxes
Deferred tax assets and liabilities are recognized for the expected future tax consequences of events
that have been recognized in the company’s financial statements or tax returns. The company evaluates the
realizability of its deferred tax assets and maintains a valuation allowance, if necessary, to reduce certain
deferred tax assets to amounts that are more likely than not to be realized. The factors used to assess the
likelihood of realization are the company’s forecast of future taxable income and available tax planning
strategies that could be implemented to realize the net deferred tax assets. Failure to achieve forecasted
taxable income in the applicable taxing jurisdictions could affect the ultimate realization of deferred tax
assets and could result in an increase in the company’s effective tax rate on future earnings.
Income tax positions must meet a more-likely-than-not recognition threshold to be recognized.
Income tax positions that previously failed to meet the more-likely-than-not threshold are recognized in
the first subsequent financial reporting period in which that threshold is met. Previously recognized tax
positions that no longer meet the more-likely-than-not threshold are derecognized in the first subsequent
financial reporting period in which that threshold is no longer met. The company recognizes potential
interest and penalties related to unrecognized tax benefits within its global operations in income tax
expense.
Judgment is required in determining the consolidated provision for income taxes as the company
considers its worldwide taxable earnings and the impact of the continuing audit process conducted by
various tax authorities. The final outcome of these audits by foreign jurisdictions, the Internal Revenue
Service and various state governments could differ materially from that which is reflected in the
Consolidated Financial Statements.
Derivatives and Hedging
The company limits exposure to foreign currency fluctuations in most of its engineering and
construction contracts through provisions that require client payments in currencies corresponding to the
currencies in which cost is incurred. Certain financial exposure, which includes currency and commodity
price risk associated with engineering and construction contracts, currency risk associated with monetary
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