MoneyGram 2009 Annual Report Download - page 60

Table of Contents
The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. Due
to the subjective nature of these assumptions, the estimates determined may not be indicative of the actual exit price if the investment was
sold at the measurement date. In the current market, the most subjective assumptions include the default rate of collateral securities and
loss severity as it relates to our other asset-backed securities. As of December 31, 2009, we continue to hold investments classified as
other asset-backed securities with a fair value of $22.1 million. Using the highest and lowest prices received as part of the valuation
process described above, the range of fair value for these securities was $21.7 million to $35.7 million. At December 31, 2009,
$16.4 million, or less than 1 percent, of our total investment portfolio was valued using internal pricing information. Had we used the
third party price to value these internally priced securities, the value of these investments would have been $16.8 million.
Goodwill — We perform impairment testing of our goodwill balances on an annual basis and whenever an impairment indicator is
identified. The testing is performed by comparing the estimated fair value of our reporting units to their carrying values. The fair value of
our reporting units is estimated based on expected future cash flows discounted using a weighted-average cost of capital rate (the
"discount rate"). Our discount rate is based on our debt and equity balances, adjusted for current market conditions and investor
expectations of return on our equity. In addition, an assumed terminal value is used to project future cash flows beyond base years.
Assumptions used in our impairment testing, such as forecasted growth rates and the discount rate, are consistent with our internal
forecasts and operating plans. The estimates and assumptions regarding expected cash flows, terminal values and the discount rate require
considerable judgment and are based on historical experience, financial forecasts and industry trends and conditions.
As a result of impairment indicators, we recognized two goodwill impairment charges during 2009. In connection with the sale of FSMC,
Inc., we recorded a charge of $0.6 million in the second quarter of 2009 to impair goodwill assigned to that reporting unit. We also
impaired $3.2 million of goodwill in connection with the decision to discontinue certain bill payment products in the second quarter of
2009.
In connection with the annual impairment test for 2009, we assessed the following reporting units: Global Funds Transfer, Retail Money
Order, Financial Institution Money Order, Official Check and ACH Commerce. The Global Funds Transfer reporting unit had assigned
goodwill of $425.6 million and the Retail Money Order reporting unit had assigned goodwill of $2.5 million. No goodwill is assigned to
the other reporting units. As a result of the annual impairment test, we recorded a $2.5 million charge to fully impair the goodwill
assigned to the Retail Money Order reporting unit, reflecting our expectations for the money order business as discussed in "Trends
Expected to Impact 2010." The annual impairment test indicated a fair value for the Global Funds Transfer reporting unit that was
substantially in excess of the reporting unit's carrying value. This excess is consistent with our expectations for the reporting unit and
market indicators. Accordingly, we believe the goodwill assigned to the Global Funds Transfer reporting unit is not impaired. If the
discount rate for the Global Funds Transfer reporting unit increases by 50 basis points from the rate used in our fair value estimate, fair
value would be reduced by approximately $79.5 million, assuming all other components of the fair value estimate remain unchanged. If
the growth rate for the Global Funds Transfer reporting unit decreases by 50 basis points from the rate used in our fair value estimate, fair
value would be reduced by approximately $26.6 million, assuming all other components of the fair value estimate remain unchanged. Our
estimated fair value for the Global Funds Transfer reporting unit would continue to be substantially in excess under either scenario.
Pension obligations — Through our qualified pension plan and various supplemental executive retirement plans, collectively referred to
as our "pension" plans, we provide defined benefit pension plan coverage to certain of our employees and former employees of Viad. Our
pension obligations under these plans are measured as of December 31 (the "measurement date"). Pension benefits and the related
expense are based upon actuarial projections using assumptions regarding mortality, discount rates, long-term return on assets and other
factors. Following are the
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