Halliburton 2011 Annual Report Download - page 93

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Goodwill and other intangible assets
We record as goodwill the excess purchase price over the fair value of the tangible and identifiable
intangible assets acquired. During 2011, we recorded an additional $424 million in goodwill arising from
2011 acquisitions, of which $411 million related to the Completion and Production segment and $13
million related to the Drilling and Evaluation segment. The reported amounts of goodwill for each
reporting unit are reviewed for impairment on an annual basis, during the third quarter, and more frequently
when negative conditions such as significant current or projected operating losses exist. In September 2011,
the Financial Accounting Standards Board (FASB) issued an update to existing guidance on the assessment
of goodwill impairment to allow companies the option to perform a qualitative assessment to determine
whether further goodwill impairment testing is necessary. The annual impairment test for goodwill is a
two-step process and involves comparing the estimated fair value of each reporting unit to the reporting
unit’ s carrying value, including goodwill. If the fair value of a reporting unit exceeds its carrying amount,
goodwill of the reporting unit is not considered impaired, and the second step of the impairment test is
unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the
goodwill impairment test would be performed to measure the amount of impairment loss to be recorded, if
any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’ s
goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined in the
same manner as the amount of goodwill recognized in a business combination. In other words, the
estimated fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including
any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination
and the fair value of the reporting unit was the purchase price paid. If the carrying amount of the reporting
unit’ s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an
amount equal to that excess. Our goodwill impairment assessment indicated the fair value of each of our
reporting units exceeded its carrying amount by a significant margin for 2011, 2010, and 2009. In addition,
there were no triggering events that occurred in 2011, 2010, or 2009 requiring us to perform additional
impairment reviews.
We amortize other identifiable intangible assets with a finite life on a straight-line basis over the
period which the asset is expected to contribute to our future cash flows, ranging from three to 20 years.
The components of these other intangible assets generally consist of patents, license agreements, non-
compete agreements, trademarks, and customer lists and contracts.
Evaluating impairment of long-lived assets
When events or changes in circumstances indicate that long-lived assets other than goodwill may
be impaired, an evaluation is performed. For an asset classified as held for use, the estimated future
undiscounted cash flows associated with the asset are compared to the asset’ s carrying amount to determine
if a write-down to fair value is required. When an asset is classified as held for sale, the asset’ s book value
is evaluated and adjusted to the lower of its carrying amount or fair value less cost to sell. In addition,
depreciation and amortization is ceased while it is classified as held for sale.