Tyson Foods 2015 Annual Report Download - page 53
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Please find page 53 of the 2015 Tyson Foods annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Goodwill and Intangible Assets: Definitelifeintangiblesareinitiallyrecordedatfairvalueandamortizedovertheestimatedperiodofbenefit,whichisgenerally
basedonthestraight-linemethodover20yearsorless.Amortizationexpenseisgenerallyrecognizedinselling,general,andadministrativeexpense.Wereview
thecarryingvalueofdefinitelifeintangiblesateachbalancesheetdateifindicationofimpairmentexists.Recoverabilityisassessedusingundiscountedcashflows
basedonhistoricalresultsandcurrentprojectionsofearningsbeforeinterest,taxes,depreciationandamortization.Wemeasureimpairmentastheexcessof
carryingvalueoverthefairvalueofthedefinitelifeintangibleasset.Weusevariousvaluationtechniquestoestimatefairvalue,withtheprimarytechniquesbeing
discountedcashflows,relief-from-royaltyandmulti-periodexcessearningsvaluationapproaches,whichusesignificantunobservableinputs,orLevel3inputs,as
definedbythefairvaluehierarchy.Underthesevaluationapproaches,wearerequiredtomakeestimatesandassumptionsaboutsales,operatingmargins,growth
rates,royaltyratesanddiscountratesbasedonbudgets,businessplans,economicprojections,anticipatedfuturecashflowsandmarketplacedata.
Goodwillandindefinitelifeintangibleassetsareinitiallyrecordedatfairvalueandnotamortized,butarereviewedforimpairmentatleastannuallyormore
frequentlyifimpairmentindicatorsarise.Ourgoodwillisallocatedbyreportingunitandisevaluatedforimpairmentbyfirstperformingaqualitativeassessmentto
determinewhetheraquantitativegoodwilltestisnecessary.Ifitisdetermined,basedonqualitativefactors,thefairvalueofthereportingunitmaybemorelikely
thannotlessthancarryingamount,orifsignificantchangestomacro-economicfactorsrelatedtothereportingunithaveoccurredthatcouldmateriallyimpactfair
value,aquantitativegoodwillimpairmenttestwouldberequired.Additionally,wecanelecttoforgothequalitativeassessmentandperformthequantitativetest.
Thefirststepofthequantitativetestistoidentifyifapotentialimpairmentexistsbycomparingthefairvalueofareportingunitwithitscarryingamount,
includinggoodwill.Ifthefairvalueofareportingunitexceedsitscarryingamount,goodwillofthereportingunitisnotconsideredtohaveapotentialimpairment
andthesecondstepofthequantitativeimpairmenttestisnotnecessary.However,ifthecarryingamountofareportingunitexceedsitsfairvalue,thesecondstep
isperformedtodetermineifgoodwillisimpairedandtomeasuretheamountofimpairmentlosstorecognize,ifany.Thesecondstepcomparestheimpliedfair
valueofgoodwillwiththecarryingamountofgoodwill.Iftheimpliedfairvalueofgoodwillexceedsthecarryingamount,thengoodwillisnotconsidered
impaired.However,ifthecarryingamountofgoodwillexceedstheimpliedfairvalue,animpairmentlossisrecognizedinanamountequaltothatexcess.The
impliedfairvalueofgoodwillisdeterminedinthesamemannerastheamountofgoodwillrecognizedinabusinesscombination(i.e.,thefairvalueofthe
reportingunitisallocatedtoalltheassetsandliabilities,includinganyunrecognizedintangibleassets,asifthereportingunithadbeenacquiredinabusiness
combinationandthefairvalueofthereportingunitwasdeterminedastheexitpriceamarketparticipantwouldpayforthesamebusiness).Wehaveelectedto
makethefirstdayofthefourthquartertheannualimpairmentassessmentdateforgoodwillandindefinitelifeintangibleassets.
Weestimatethefairvalueofourreportingunitsusingadiscountedcashflowanalysis,whichusessignificantunobservableinputs,orLevel3inputs,asdefinedby
thefairvaluehierarchy.Thisanalysisrequiresustomakevariousjudgmentalestimatesandassumptionsaboutsales,operatingmargins,growthratesanddiscount
factorsandisbelievedtoreflectmarketparticipantviewswhichwouldexistinanexittransaction.Generally,weutilizenormalizedoperatingmarginassumptions
basedonfutureexpectationsandoperatingmarginshistoricallyrealizedinthereportingunits'industries.Someoftheinherentestimatesandassumptionsusedin
determiningfairvalueofthereportingunitsareoutsidethecontrolofmanagement,includinginterestrates,costofcapital,taxratesandcreditratings.Whilewe
believewehavemadereasonableestimatesandassumptionstocalculatethefairvalueofthereportingunits,itispossibleamaterialchangecouldoccur.Ifour
actualresultsarenotconsistentwithourestimatesandassumptionsusedtocalculatefairvalue,wemayberequiredtoperformthesecondstepofthequantitative
testinfutureyears,whichcouldresultinmaterialimpairmentsofourgoodwill.
Thediscountrateusedinourannualgoodwillimpairmenttestdecreasedto6.8%infiscal2015from7.9%infiscal2014.Thediscountrateusedinourindefinite
lifeintangibletestwas8.0%infiscal2015.WedidnothavematerialindefinitelifeintangibleassetspriortotheacquisitionofHillshireBrandsinAugust2014.
Duringfiscal2015,2014and2013,allofourmaterialreportingunitsthatunderwentaquantitativetestpassedthefirststepofthegoodwillimpairmentanalysis
andtherefore,thesecondstepwasnotnecessary.Infiscal2015,werecordeda$23millionfullimpairmentofanimmaterialreportingunit’sgoodwill.
Forourindefinitelifeintangibleassets,aqualitativeassessmentcanalsobeperformedtodeterminewhethertheexistenceofeventsandcircumstancesindicatesit
ismorelikelythannotanintangibleassetisimpaired.Similartogoodwill,wecanalsoelecttoforgothequalitativetestforindefinitelifeintangibleassetsand
performthequantitativetest.Uponperformingthequantitativetest,ifthecarryingvalueoftheintangibleassetexceedsitsfairvalue,animpairmentlossis
recognizedinanamountequaltothatexcess.
Thefairvalueofourindefinitelifeintangibleassetsiscalculatedprincipallyusingrelief-from-royaltyandmulti-periodexcessearningsvaluationapproaches,
whichusesignificantunobservableinputs,orLevel3inputs,asdefinedbythefairvaluehierarchy,andisbelievedtoreflectmarketparticipantviewswhichwould
existinanexittransaction.Underthesevaluationapproaches,wearerequiredtomakeestimatesandassumptionsaboutsales,operatingmargins,growthrates,
royaltyratesanddiscountratesbasedonbudgets,businessplans,economicprojections,anticipatedfuturecashflowsandmarketplacedata.
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