National Oilwell Varco 2010 Annual Report Download - page 74

Identified intangible assets by major classification consist of the following (in millions):
Accumulated Net Book
Gross Amortization Value
December 31, 2009:
Customer relationships $ 2,819 $ (366) $ 2,453
Trademarks 619 (73) 546
Indefinite-lived trade names 643  643
Other 531 (121) 410
Total identified intangibles $ 4,612 $ (560) $ 4,052
December 31, 2010:
Customer relationships $ 2,933 $ (536) $ 2,397
Trademarks 677 (95) 582
Indefinite-lived trade names 643  643
Other 655 (174) 481
Total identified intangibles $ 4,908 $ (805) $ 4,103
2009 Asset Impairment
During the second quarter of 2009, the worldwide average rig count was 2,009 rigs, down 41% from the fourth quarter 2008 average of 3,395 and
down 25% from the first quarter 2009 average of 2,681. The second quarter 2009 average rig count represented the lowest quarterly average in
the past six years. In addition, the Companys updated forecast was behind the Companys previous forecast completed at the beginning of
2009. While operating profit for the first quarter of 2009 was in line with the Companys first quarter 2009 operating profit forecast, the
Companys consolidated operating profit for the second quarter of 2009 was below its second quarter 2009 forecast. As a result of the substantial
decline in the worldwide rig count, and the decline in actual/forecasted results compared to the original 2009 forecast, the Company concluded
that events or circumstances had occurred indicating that goodwill and other indefinite-lived intangible assets might be impaired as described in
ASC Topic 350, Intangibles  Goodwill and Other (ASC Topic 350).
Therefore, the Company performed its interim impairment test of goodwill for its reporting units and its indefinite-lived intangible assets at the
end of the second quarter of 2009. Projections for the remainder of 2009 also reflected declines compared to the original 2009 annual forecast.
The Company updated its 2009 operating forecast, long-term forecast, and discounted cash flows based on this information.
The goodwill impairment analysis that the Company performed during the second quarter of 2009 did not result in goodwill impairment as of
June 30, 2009. However, based on the Companys indefinite-lived intangible asset impairment analysis performed during the second quarter of
2009, the Company incurred an impairment charge of $147 million in the Petroleum Services & Supplies segment related to a partial impairment
of the Companys Grant Prideco trade name. The impairment charge was primarily the result of the substantial decline in worldwide rig counts
through June 2009, declines in forecasts in rig activity for the remainder of 2009, 2010, and 2011 compared to rig count forecast at the beginning
of 2009, and a decline in the revenue forecast for the drill pipe business unit for the remainder of 2009, 2010, and 2011.
The Company performed its annual impairment analysis for its goodwill and indefinite-lived assets during the fourth quarter of 2009 and 2010
each resulting in no further impairment. The valuation techniques used in the annual test were consistent with those used during previous testing.
The inputs used in the annual test were updated for current market conditions and forecasts.
Foreign Currency
The functional currency for most of our foreign operations is the local currency. The cumulative effects of translating the balance sheet accounts
from the functional currency into the U.S. dollar at current exchange rates are included in accumulated other comprehensive income (loss).
Revenues and expenses are translated at average exchange rates in effect during the period. Certain other foreign operations, including our
operations in Norway, use the U.S. dollar as the functional currency. Accordingly, financial statements of these foreign subsidiaries are
remeasured to U.S. dollars for consolidation purposes using current rates of exchange for monetary assets and liabilities and historical rates of
exchange for nonmonetary assets and related elements of expense. Revenue and expense elements are remeasured at rates that approximate the
rates in effect on the transaction dates. For all operations, gains or losses from remeasuring foreign currency
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