Henry Schein 2014 Annual Report Download - page 85

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HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(in thousands, except per share data)
71
Note 1 – Significant Accounting Policies – (Continued)
Redeemable Noncontrolling Interests
Some minority shareholders in certain of our subsidiaries have the right, at certain times, to require us to
acquire their ownership interest in those entities at fair value. Their interests in these subsidiaries are classified
outside permanent equity on our consolidated balance sheets and are carried at the estimated redemption amounts.
The redemption amounts have been estimated based on expected future earnings and cash flow and, if such
earnings and cash flow are not achieved, the value of the redeemable noncontrolling interests might be impacted.
Changes in the estimated redemption amounts of the noncontrolling interests subject to put options are reflected at
each reporting period with a corresponding adjustment to Additional paid-in capital. Future reductions in the
carrying amounts are subject to a “floor” amount that is equal to the fair value of the redeemable noncontrolling
interests at the time they were originally recorded. The recorded value of the redeemable noncontrolling interests
cannot go below the floor level. These adjustments do not impact the calculation of earnings per share.
Goodwill and Other Indefinite-Lived Intangible Assets
Goodwill and other indefinite-lived intangible assets (primarily trademarks) are not amortized, but are subject
to impairment analysis at least once annually. Such impairment analyses for goodwill require a comparison of the
fair value to the carrying value of reporting units. We regard our reporting units to be our operating segments:
health care distribution (global dental, animal health and medical) and technology and value-added services.
We test goodwill for impairment under the provisions of Accounting Standards Update 2011-08, “Intangibles-
Goodwill and Other (Topic 350): Testing Goodwill for Impairment,” which allows us to use qualitative factors to
determine whether it is more likely than not that the fair values of our reporting units are less than their carrying
values. The factors that we consider in developing our qualitative assessment include:
• Macroeconomic conditions consisting of the overall sales growth of our business and the overall sales
growth of each of our operating segments. We also consider our growth in market share in the markets in
which we compete;
• Credit markets and our ability to access debt facilities at favorable terms;
• Key personnel and management expertise, as well as our growth strategies for the next several years; and
• Our expectations of selling or disposing all, or a portion, of a reporting unit.
Goodwill was allocated to such reporting units, for the purposes of preparing our impairment analyses, based
on a specific identification basis. Our impairment analysis for indefinite-lived intangibles consists of a comparison
of the fair value to the carrying value of the assets. This comparison is made based on a review of historical,
current and forecasted sales and gross profit levels, as well as a review of any factors that may indicate potential
impairment. For certain indefinite-lived intangible assets, a present value technique, such as estimates of future
cash flows, is utilized. We assessed the potential impairment of goodwill and other indefinite-lived intangible
assets annually (at the beginning of our fourth quarter) and on an interim basis whenever events or changes in
circumstances indicate that the carrying value may not be recoverable.
Some factors we consider important that could trigger an interim impairment review include:
• significant underperformance relative to expected historical or projected future operating results;
• significant changes in the manner of our use of acquired assets or the strategy for our overall business
(e.g., decision to divest a business); or
• significant negative industry or economic trends.
If we determine through the impairment review process that goodwill or other indefinite-lived intangible assets
are impaired, we record an impairment charge in our consolidated statements of income.