Memorex 2010 Annual Report Download - page 56

Goodwill
The following table presents the changes in goodwill allocated to our reportable segments:
Americas Europe North Asia South Asia
Electronic
Products Total
(In millions)
Balance as of December 31, 2008:
Goodwill . . . . . . . . . . . . . . . . . . . . $ 64.3 $ 39.2 $ 10.2 $— $ 38.6 $ 152.3
Accumulated impairment losses . . . . (64.3) (39.2) (10.2) — (15.1) (128.8)
— — — — 23.5 23.5
Balance as of December 31, 2009:
Goodwill . . . . . . . . . . . . . . . . . . . . $ 64.3 $ 39.2 $ 10.2 $— $ 38.6 $ 152.3
Accumulated impairment losses . . . . (64.3) (39.2) (10.2) — (15.1) (128.8)
— — — — 23.5 23.5
Operating segment reclassification:
Goodwill . . . . . . . . . . . . . . . . . . . . 38.6 — — — (38.6) —
Accumulated impairment losses . . . . (15.1) — — — 15.1 —
Goodwill impairment. . . . . . . . . . . . . . (23.5) — — — — (23.5)
Balance as of December 31, 2010:
Goodwill . . . . . . . . . . . . . . . . . . . . $ 102.9 $ 39.2 $ 10.2 $— $ — $ 152.3
Accumulated impairment losses . . . . (102.9) (39.2) (10.2) — — (152.3)
$ — $— $— $— $— $ —
During 2010 we realigned our corporate segments and reporting structure with how the business will be managed
going forward. As part of this reorganization, we combined our Electronic Products segment with our Americas segment,
and we separated our Asia Pacific segment into North Asia and South Asia regions.
Our reporting units for goodwill are our operating segments with the exception of the Americas segment which is
further divided between the Americas-Consumer and Americas-Commercial reporting units as determined by sales channel.
As a result of the segment change, the goodwill of $23.5 million which was previously allocated to the Electronics Products
segment was merged into the Americas-Consumer reporting unit. The Americas-Consumer reporting unit had a fair value
that was significantly less than its carrying amount prior to the combination, which is a triggering event for an interim
goodwill impairment test. Goodwill is considered impaired when its carrying amount exceeds its implied fair value. A two-
step impairment test was performed to identify a potential impairment and measure an impairment loss to be recognized.
The first step of the impairment test involves comparing the fair value of the reporting unit to which goodwill was
assigned to its carrying amount. In calculating fair value, we used a weighting of the valuations calculated using the
income approach and a market approach. The summation of our reporting units’ fair values is compared and reconciled to
our market capitalization as of the date of our impairment test.
Based on the goodwill test performed, we determined that the carrying amount of the reporting unit significantly
exceeded its fair value. The indicated excess in carrying amount over fair value of the Americas-Consumer reporting unit
and goodwill is as follows:
Goodwill
Reporting Unit
Carrying Amount
Excess of Carrying
Amount Over
Fair Value
Percentage of
Carrying Amount
Over Fair Value
(In millions)
Americas-Consumer . . . . . . . . . . . . . . . . . $23.5 $336.5 $173.5 206%
The second step of the impairment test compares the implied fair value of the reporting unit’s goodwill with the
carrying amount of the reporting unit’s goodwill. If the carrying amount of the reporting unit’s goodwill is greater than the
implied fair value of the reporting unit’s goodwill an impairment loss must be recognized for the excess. This involves
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)