Quest Diagnostics 2008 Annual Report Download - page 85

Company would perform an impairment test of goodwill as of the end of the quarter, consistent with the annual
impairment test, and record any noted impairment loss.
Recoverability and Impairment of Intangible Assets and Other Long-Lived Assets
The Company evaluates the possible impairment of its long-lived assets, including intangible assets which
are amortized pursuant to the provisions of SFAS 142, under SFAS No. 144, “Accounting for Impairment or
Disposal of Long-Lived Assets.” The Company reviews the recoverability of its long-lived assets when events or
changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable.
Evaluation of possible impairment is based on the Company’s ability to recover the asset from the expected
future pretax cash flows (undiscounted and without interest charges) of the related operations. If the expected
undiscounted pretax cash flows are less than the carrying amount of such asset, an impairment loss is recognized
for the difference between the estimated fair value and carrying amount of the asset.
Investments
The Company accounts for investments in equity securities, which are included in “other assets” in the
consolidated balance sheet, in conformity with SFAS No. 115, “Accounting for Certain Investments in Debt and
Equity Securities,” which requires the use of fair value accounting for trading or available-for-sale securities.
Both realized and unrealized gains and losses for trading securities are recorded currently in earnings as a
component of non-operating expenses within “other expense, net” in the consolidated statements of operations.
Unrealized gains and losses, net of tax, for available-for-sale securities are recorded as a component of
“accumulated other comprehensive (loss) income” within stockholders’ equity. Recognized gains and losses for
available-for-sale securities are recorded in “other expense, net” in the consolidated statements of operations.
Gains and losses on securities sold are based on the average cost method.
The Company periodically reviews its investments to determine whether a decline in fair value below the
cost basis is other than temporary. The primary factors considered in the determination are: the length of time
that the fair value of the investment is below carrying value; the financial condition, operating performance and
near term prospects of the investee; and the Company’s intent and ability to hold the investment for a period of
time sufficient to allow for a recovery in fair value. If the decline in fair value is deemed to be other than
temporary, the cost basis of the security is written down to fair value.
Investments at December 31, 2008 and 2007 consisted of the following:
2008 2007
Available-for-sale equity securities ...................................... $ 255 $ 9,690
Trading equity securities ............................................... 25,383 33,903
Other investments ...................................................... 15,539 16,460
Total ............................................................. $41,177 $60,053
Investments in available-for-sale equity securities consist of equity securities in public corporations.
Investments in trading equity securities represent participant-directed investments of deferred employee
compensation and related Company matching contributions held in a trust pursuant to the Company’s
supplemental deferred compensation plan (see Note 12). Other investments do not have readily determinable fair
values and consist of investments in preferred and common shares of privately held companies and are accounted
for under the cost method.
As of December 31, 2008 and 2007, the Company had gross unrealized losses from available-for-sale equity
securities of $0.6 million and $3.5 million, respectively. For the year ended December 31, 2008 and 2007, “other
expense, net,” within the consolidated statements of operations, includes $8.9 million and $4.0 million,
respectively, of charges associated with the write-down of available-for-sale equity securities. For the year ended
December 31, 2006, “other expense, net,” within the consolidated statements of operations, includes $16.2 million
of charges associated with the write-down of available-for-sale equity securities, $10.0 million of charges
associated with the write-down of other investments and a $15.8 million gain associated with the sale of an
investment. For the years ended December 31, 2008, 2007 and 2006, (losses) gains from trading equity securities
totaled $(9.9) million, $2.7 million and $3.2 million, respectively, and are included in “other expense, net.”
F-13
QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)