Sara Lee 2013 Annual Report Download - page 42

40 The Hillshire Brands Company
NOTES TO FINANCIAL STATEMENTS
BUSINESS ACQUISITIONS
With respect to business acquisitions, the company is required to
recognize and measure the identifiable assets acquired, liabilities
assumed, contractual contingencies, contingent consideration and
any noncontrolling interest in an acquired business at fair value
on the acquisition date. In addition, the accounting guidance also
requires expensing acquisition costs when incurred, restructuring
costs in periods subsequent to the acquisition date, and any adjust-
ments to deferred tax asset valuation allowances and acquired
uncertain tax positions after the measurement period to be
reflected in income tax expense.
FOREIGN CURRENCY TRANSLATION
Foreign currency denominated assets and liabilities are translated
into U.S. dollars at exchange rates existing at the respective balance
sheet dates. Translation adjustments resulting from fluctuations
in exchange rates are recorded as a separate component of other
comprehensive income within common stockholders’ equity. The
company translates the results of operations of its foreign sub-
sidiaries at the average exchange rates during the respective periods.
Gains and losses resulting from foreign currency transactions, the
amounts of which are not material, are included in selling, general
and administrative expense.
NOTE 3 – INTANGIBLE ASSETS AND GOODWILL
The primary components of the intangible assets reported in
continuing operations and the related amortization expense follows:
Accumulated Net Book
In millions Gross Amortization Value
2013
Intangible assets subject to amortization
Trademarks and brand names $÷31 $÷÷4 $÷27
Customer relationships 72 46 26
Computer software 133 112 21
Other contractual agreements 3–3
$239 $162 77
Trademarks and brand names
not subject to amortization 44
Net book value of intangible assets $121
2012
Intangible assets subject to amortization
Trademarks and brand names $÷31 $÷÷2 $÷29
Customer relationships 72 44 28
Computer software 128 100 28
Other contractual agreements 3–3
$234 $146 88
Trademarks and brand names
not subject to amortization 44
Net book value of intangible assets $132
The year-over-year change in the value of trademarks and brand
names and customer relationships is primarily due to the impact of
amortization during the year. The amortization expense reported in
continuing operations for intangible assets subject to amortization
was $17 million in 2013, $21 million in 2012 and $31 million in
2011. The estimated amortization expense for the next five years,
assuming no change in the estimated useful lives of identifiable
intangible assets or changes in foreign exchange rates, is as follows:
$17 million in 2014, $7 million in 2015, $6 million in 2016, $6 mil-
lion in 2017 and $4 million in 2018. At June 29, 2013, the weighted
average remaining useful life for trademarks is 18 years; customer
relationships is 13 years; computer software is 2 years; and other
contractual agreements is 8 years.
GOODWILL
The goodwill reported in continuing operations associated with
each business segment and the changes in those amounts during
2013 and 2012 are as follows:
Foodservice/
In millions Retail Other Total
Net book value at July 2, 2011
Gross goodwill $139 $«591 $«730
Accumulated impairment losses – (382) (382)
Net goodwill 139 209 348
Net book value at June 30, 2012
Gross goodwill 139 591 730
Accumulated impairment losses – (382) (382)
Net goodwill 139 209 348
Net book value at June 29, 2013
Gross goodwill 139 591 730
Accumulated impairment losses – (382) (382)
Net goodwill $139 $«209 $«348
NOTE 4 – IMPAIRMENT CHARGES
The company recognized impairment charges in 2013, 2012
and 2011 and the significant impairments are reported on the
“Impairment charges” line of the Consolidated Statements of Income.
The impact of these charges is summarized in the following table:
Pretax
Impairment
In millions Charge
2013
Retail $÷1
2012
General corporate expenses $14
2011
Foodservice/Other $15