Morgan Stanley 2010 Annual Report Download - page 84

acquired or organically developed, are available to support the value of the goodwill. Goodwill impairment is
determined by comparing the estimated fair value of a reporting unit with its respective book value. If the
estimated fair value exceeds the book value, goodwill at the reporting unit level is not deemed to be impaired. If
the estimated fair value is below book value, however, further analysis is required to determine the amount of the
impairment. The estimated fair values of the reporting units are derived based on valuation techniques the
Company believes market participants would use for each of the reporting units. The estimated fair values are
generally determined utilizing methodologies that incorporate price-to-book, price-to-earnings and assets under
management multiples of certain comparable companies.
Intangible Assets. Amortizable intangible assets are amortized over their estimated useful lives and reviewed
for impairment on an interim basis when certain events or circumstances exist. For amortizable intangible assets,
an impairment exists when the carrying amount of the intangible asset exceeds its fair value. An impairment loss
will be recognized only if the carrying amount of the intangible asset is not recoverable and exceeds its fair
value. The carrying amount of the intangible asset is not recoverable if it exceeds the sum of the expected
undiscounted cash flows.
Indefinite-lived intangible assets are not amortized but are reviewed annually (or more frequently when certain
events or circumstances exist) for impairment. For indefinite-lived intangible assets, an impairment exists when
the carrying amount exceeds its fair value.
See Note 4 to the consolidated financial statements for intangible asset impairments recorded during 2010.
For both goodwill and intangible assets, to the extent an impairment loss is recognized, the loss establishes the
new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. For amortizable intangible
assets, the new cost basis is amortized over the remaining useful life of that asset. Adverse market or economic
events could result in impairment charges in future periods.
See Note 9 to the consolidated financial statements for further information on goodwill and intangible assets.
Legal, Regulatory and Tax Contingencies.
In the normal course of business, the Company has been named, from time to time, as a defendant in various
legal actions, including arbitrations, class actions and other litigation, arising in connection with its activities as a
global diversified financial services institution.
Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive
damages or claims for indeterminate amounts of damages. In some cases, the entities that would otherwise be the
primary defendants in such cases are bankrupt or in financial distress.
The Company is also involved, from time to time, in other reviews, investigations and proceedings (both formal
and informal) by governmental and self-regulatory agencies regarding the Company’s business, including,
among other matters, accounting and operational matters, certain of which may result in adverse judgments,
settlements, fines, penalties, injunctions or other relief.
Accruals for litigation and regulatory proceedings are generally determined on a case-by-case basis. Where
available information indicates that it is probable a liability had been incurred at the date of the consolidated
financial statements and the Company can reasonably estimate the amount of that loss, the Company accrues the
estimated loss by a charge to income. In many proceedings, however, it is inherently difficult to determine
whether any loss is probable or even possible or to estimate the amount of any loss. For certain legal
proceedings, the Company can estimate possible losses, additional losses, ranges of loss or ranges of additional
loss in excess of amounts accrued. For certain other legal proceedings, the Company cannot reasonably estimate
such losses, particularly for proceedings that are in their early stages of development or where plaintiffs seek
substantial or indeterminate damages. Numerous issues may need to be resolved, including through potentially
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