Sallie Mae 2011 Annual Report Download - page 131

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Significant Accounting Policies (Continued)
1 consists of a comparison of the fair value of the reporting unit to the reporting unit’s 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.
The new guidance is effective for annual and interim goodwill impairment tests performed for fiscal years
beginning after December 15, 2011. However, an entity can choose to early adopt this new guidance. We early
adopted the new guidance in the fourth quarter 2011. After assessing relevant qualitative factors including but
not limited to the current legislative environment, stock price performance, market capitalization and EPS results,
we determined that it is more-likely-than-not that the fair value of the reporting units exceeds their carrying
amounts. Accordingly, we did not perform the Step 1 impairment analysis as of October 1, 2011.
Other acquired intangible assets include but are not limited to tradenames, customer and other relationships,
and non-compete agreements. Acquired intangible assets with 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 amortized. They are tested for impairment annually as of October 1 or at
interim periods if an event occurs or circumstances change that would indicate the carrying value of these assets
may be impaired. The annual or interim impairment test of indefinite-lived acquired intangible assets is based
primarily on a discounted cash flow analysis.
Restructuring Activities
From time to time we implement plans to restructure our business. In conjunction with these restructuring
plans, involuntary benefit arrangements, disposal costs (including contract termination costs and other exit costs),
as well as certain other costs that are incremental and incurred as a direct result of our restructuring plans, are
classified as restructuring expenses in the accompanying consolidated statements of income.
We sponsor the SLM Corporation Employee Severance Plan (the “Severance Plan”) which provides
severance benefits in the event of termination of our full-time employees (with the exception of certain specified
levels of management) and part-time employees who work at least 24 hours per week. The Severance Plan
establishes specified benefits based on base salary, job level immediately preceding termination and years of
service upon termination of employment due to Involuntary Termination or a Job Abolishment, as defined in the
Severance Plan. The benefits payable under the Severance Plan relate to past service and they accumulate and
vest. Accordingly, we recognize severance costs to be paid pursuant to the Severance Plan when payment of such
benefits is probable and reasonably estimable. Such benefits, including severance pay calculated based on the
Severance Plan, medical and dental benefits, outplacement services and continuation pay, have been incurred
during the years ended December 31, 2011, 2010 and 2009, as a direct result of our restructuring initiatives.
Accordingly, such costs are classified as restructuring expenses in the accompanying consolidated statements of
income. See “Note 12—Restructuring Activities” for further information regarding our restructuring activities.
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