Orbitz 2009 Annual Report Download - page 83

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4. Impairment of Goodwill and Intangible Assets
In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” we assess the carrying value
of goodwill and other indefinite-lived intangible assets for impairment annually, or more frequently whenever
events occur and circumstances change indicating potential impairment. We also evaluate the recoverability of
our long-lived assets, including our finite-lived intangible assets, when circumstances indicate that the carrying
value of those assets may not be recoverable pursuant to SFAS No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets.” Refer to Note 2 — Summary of Significant Accounting Policies for further
information on our accounting policy for goodwill, other indefinite-lived intangible assets and finite-lived
intangible assets.
2008
During the year ended December 31, 2008, in connection with our annual planning process, we lowered
our long-term earnings forecast in response to changes in the economic environment, including the potential
future impact of airline capacity reductions, increased fuel prices and a weakening global economy. These
factors, coupled with a prolonged decline in our market capitalization, indicated potential impairment of our
goodwill, trademarks and trade names. Additionally, given the current environment, our distribution partners
are under increased pressure to reduce their overall costs and could attempt to terminate or renegotiate their
agreements with us on more favorable terms to them. These factors indicated that the carrying value of certain
of our finite-lived intangible assets, specifically customer relationships, may not be recoverable. As a result, in
connection with the preparation of our financial statements for the third quarter of 2008, we performed an
interim impairment test of our goodwill, indefinite-lived intangible assets and finite-lived intangible assets.
For purposes of testing goodwill for potential impairment, we estimated the fair value of the applicable
reporting units to which all goodwill is allocated using generally accepted valuation methodologies, including
market and income based approaches, and relevant data available through and as of September 30, 2008.
We further used appropriate valuation techniques to separately estimate the fair values of all of our
indefinite-lived intangible assets as of September 30, 2008 and compared those estimates to the respective
carrying values. Our indefinite-lived intangible assets are comprised of trademarks and trade names. We used a
market or income valuation approach, as described above, to estimate fair values of the relevant trademarks
and trade names.
We also determined the estimated fair values of certain of our finite-lived intangible assets as of
September 30, 2008, specifically certain of our customer relationships whose carrying values exceeded their
expected future cash flows on an undiscounted basis. We determined the fair values of these customer
relationships by discounting the estimated future cash flows of these assets. We then compared the estimated
fair values to the respective carrying values.
As a result of this testing, we concluded that the goodwill, trademarks and trade names related to both
our domestic and international subsidiaries as well as the customer relationships related to our domestic
subsidiaries were impaired. As a result, we recorded a non-cash impairment charge of $297 million during the
year ended December 31, 2008, of which $210 million related to goodwill, $74 million related to trademarks
and trade names and $13 million related to customer relationships. This charge is included in the impairment
of goodwill and intangible assets expense line item in our consolidated statements of operations.
Due to the current economic uncertainty and other factors, we cannot assure that goodwill, indefinite-
lived intangible assets and finite-lived intangible assets will not be further impaired in future periods.
2006
In 2006, we performed impairment testing on our goodwill, other indefinite-lived intangible assets and
finite-lived intangible assets prior to the date of the Blackstone Acquisition because the offer price indicated a
83
ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)