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Management’s Discussion and Analysis
40 GOLDMAN SACHS 2003 ANNUAL REPORT
Goodwill and Identifiable Intangible Assets
As a result of our business combinations, principally with
SLK LLC (SLK) in fiscal 2000, we have acquired
goodwill and identifiable intangible assets. Goodwill is
the cost of acquired companies in excess of the fair value
of net assets, including identifiable intangible assets, at
the acquisition date.
goodwill – We test the goodwill in each of our operat-
ing segments for impairment at least annually in accor-
dance with Statement of Financial Accounting Standards
(SFAS) No. 142, “Goodwill and Other Intangible
Assets,” by comparing the estimated fair value of each
operating segment with its estimated net book value. We
derive the fair value of each of our operating segments
primarily based on earnings multiples. We derive the net
book value of our operating segments by estimating the
amount of shareholders’ equity required to support the
assets of each operating segment. Our last annual impair-
ment test was performed during our fiscal 2003 fourth
quarter and no impairment was identified.
The following table sets forth the carrying value of our
goodwill by operating segment:
GOODWILL BY OPERATING SEGMENT
AS OF NOVEMBER
(IN MILLIONS) 2003 2002
Investment Banking
Financial Advisory $— $ —
Underwriting 125 123
Trading and Principal Investments
FICC 117 117
Equities(1) 2,384 2,374
Principal Investments ——
Asset Management and
Securities Services
Asset Management 419(2) 128
Securities Services 117 117
Total $3,162 $2,859
(1) Primarily related to our combinations with SLK and The Hull Group.
(2) Primarily related to our combination with The Ayco Company, L.P. (Ayco).
identifiable intangible assets – We amortize our identi-
fiable intangible assets over their estimated useful lives in
accordance with SFAS No. 142, and test for potential
impairment whenever events or changes in circum-
stances suggest that an asset’s or asset group’s carrying
value may not be fully recoverable in accordance with
SFAS No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets.” An impairment loss,
calculated as the difference between the estimated fair
value and the carrying value of an asset or asset group,
is recognized if the expected undiscounted cash flows
relating to the asset or asset group are less than the cor-
responding carrying value.
During our fiscal fourth quarter, the American Stock
Exchange, the Chicago Board Options Exchange and the
Philadelphia Stock Exchange all announced proposed
restructuring plans and continued to experience loss of
market share to the International Securities Exchange,
which became the leading U.S. options exchange during
2003. Consequently, we tested our related option special-
ist rights for impairment during the fourth quarter, and
recognized an impairment charge of $133 million. The
estimated fair value of the option specialist rights was
derived from expected discounted cash flows. We also
surrendered certain option specialist rights in earlier
quarters, recognizing total charges of $20 million.