Sallie Mae 2010 Annual Report Download - page 125

2. Significant Accounting Policies (Continued)
We earn fees in our Campus Payment Solutions business for processing tuition and other payments for
our college and university partners. We recognize this fee income based on contractual arrangements in the
period in which the services are provided which generally occurs when the transaction is processed.
We provide a full complement of administrative services to FFELP Guarantors including guarantee
issuance and account maintenance for Guarantor agencies. The fees associated with these services are
recognized as earned based on contractually determined rates.
Contingency Revenue
We receive fees for collections of delinquent debt on behalf of clients performed on a contingency basis.
Revenue is earned and recognized upon receipt of the delinquent borrower funds.
We also receives fees from Guarantor agencies for performing default aversion services on delinquent
loans prior to default. The fee is received when the loan is initially placed with us and we are obligated to
provide such services for the remaining life of the loan for no additional fee. In the event that the loan
defaults, we are obligated to rebate a portion of the fee to the Guarantor agency in proportion to the principal
and interest outstanding when the loan defaults. We recognize fees received, net of actual rebates for defaults,
over the service period which is estimated to be the life of the loan.
Goodwill and Acquired Intangible Assets
We account for goodwill and acquired intangible assets in accordance with the applicable accounting
guidance. Under this guidance goodwill is not amortized but is tested periodically for impairment. We test
goodwill for impairment annually as of October 1 at the reporting unit level, which is the same as or one level
below a business segment. Goodwill is also tested at interim periods if an event occurs or circumstances
change that would indicate the carrying amount may be impaired. We tested our goodwill and intangible
assets on July 1, 2010 for impairment because of our assessment of possible changes to our business following
the passage of HCERA. This analysis showed that there was possible impairment of goodwill and certain
intangible assets in several reporting units. See Note 6, “Goodwill and Acquired Intangible Assets”, for further
discussion and results of the impairment testing.
Step 1 of the goodwill impairment analysis consists of a comparison of the fair value of the reporting
unit to our carrying value, including goodwill. If the carrying value of the reporting unit exceeds the fair
value, Step 2 in the goodwill impairment analysis is performed to measure the amount of impairment loss, if
any. Step 2 of the goodwill impairment analysis compares the implied fair value of the reporting unit’s
goodwill to the carrying value of the reporting unit’s goodwill. The implied fair value of goodwill is
determined in a manner consistent with determining goodwill in a business combination. If the carrying
amount of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, an impairment loss is
recognized in an amount equal to that excess.
Other acquired intangible assets include but are not limited to tradenames, customer and other relationships,
and non-compete agreements. Acquired intangible assets with definite or finite lives are amortized over their
estimated useful lives in proportion to their estimated economic benefit. Finite-lived acquired intangible assets are
reviewed for impairment using an undiscounted cash flow analysis when an event occurs or circumstances change
indicating the carrying amount of a finite-lived asset or asset group may not be recoverable. If the carrying amount
of the asset or asset groups exceeds the undiscounted cash flows, the fair value of the asset or asset group is
determined using an acceptable valuation technique. An impairment loss would be recognized if the carrying amount
of the asset (or asset group) exceeds the fair value of the asset or asset group. The impairment loss recognized
would be the difference between the carrying amount and fair value. Indefinite-life acquired intangible assets are not
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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)