Goldman Sachs 2013 Annual Report Download - page 176

Notes to Consolidated Financial Statements
During the fourth quarter of 2013, the firm assessed
goodwill for impairment. Multiple factors were assessed
with respect to each of the firm’s reporting units to
determine whether it was more likely than not that the fair
value of any of the reporting units was less than its carrying
amount. The qualitative assessment considered changes
since the 2012 quantitative goodwill test.
In accordance with ASC 350, the firm considered the
following factors in the 2013 qualitative assessment
performed in the fourth quarter when evaluating whether it
was more likely than not that the fair value of a reporting
unit was less than its carrying amount:
‰Macroeconomic conditions. Since the 2012
quantitative goodwill test was performed, the firm’s
general operating environment improved as credit
spreads tightened, global equity prices increased
significantly, levels of volatility were generally lower and
industry-wide equity underwriting activity improved.
‰Industry and market considerations. Since the 2012
quantitative goodwill test was performed, industry-wide
metrics have trended positively and many industry
participants, including the firm, experienced increases in
stock price, price-to-book multiples and price-to-earnings
multiples. In addition, clarity was obtained on a number
of regulations. It is early in the process of determining the
impact of these regulations, the rules are highly complex
and their full impact will not be known until market
practices are fully developed. However, the firm does not
expect compliance to have a significant negative impact
on reporting unit results.
‰Cost factors. Although certain expenses increased, there
were no significant negative changes to the firm’s overall
cost structure since the 2012 quantitative goodwill test
was performed.
‰Overall financial performance. During 2013, the firm’s
net earnings, pre-tax margin, diluted earnings per share,
return on average common shareholders’ equity and book
value per common share increased as compared
with 2012.
‰Entity-specific events. There were no entity-specific
events since the 2012 quantitative goodwill test was
performed that would have had a significant negative
impact on the valuation of the firm’s reporting units.
‰Events affecting reporting units. There were no events
since the 2012 quantitative goodwill test was performed
that would have had a significant negative impact on the
valuation of the firm’s reporting units.
‰Sustained changes in stock price. Since the 2012
quantitative goodwill test was performed, the firm’s stock
price has increased significantly. In addition, the stock
price exceeded book value per common share throughout
most of 2013.
The firm also considered other factors in its qualitative
assessment, including changes in the book value of
reporting units, the estimated excess of the fair values as
compared with the carrying values for the reporting units in
the 2012 quantitative goodwill test, projected earnings and
the cost of equity. The firm considered all of the above
factors in the aggregate as part of its qualitative assessment.
As a result of the 2013 qualitative assessment, the firm
determined that it was more likely than not that the fair
value of each of the reporting units exceeded its respective
carrying amount. Therefore, the firm determined that
goodwill was not impaired and that a quantitative goodwill
impairment test was not required.
174 Goldman Sachs 2013 Annual Report