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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
79
NOTE 6. BUSINESS ACQUISITIONS, GOODWILL AND INTANGIBLE ASSETS
The following table indicates the allocation of goodwill by reportable segment (in millions):
U.S. Domestic
Package
International
Package
Supply Chain &
Freight Consolidated
Balance on January 1, 2011 $ — $ 377 $ 1,704 $ 2,081
Acquired — — 46 46
Currency / Other — (16)(10)(26)
Balance on December 31, 2011 $ — $ 361 $ 1,740 $ 2,101
Acquired — 67 — 67
Currency / Other — 2 3 5
Balance on December 31, 2012 $ — $ 430 $ 1,743 $ 2,173
Business Acquisitions
The increase in goodwill within the International Package segment in 2012 was due to the February acquisition of Kiala
S.A. (“Kiala”), a Belgium-based developer of a platform that enables e-commerce retailers to offer their shoppers the option of
having goods delivered to a convenient retail location. Kiala currently operates in Belgium, France, Luxembourg, the
Netherlands and Spain. The acquisition broadens our service portfolio for business-to-consumer deliveries.
The increase in goodwill within the Supply Chain & Freight segment in 2011 was due to the December acquisition of the
Pieffe Group (“Pieffe”), an Italian pharmaceutical logistics company. Pieffe offers storage, distribution and other logistics
services to some of the world’s leading pharmaceutical companies.
Pro forma results of operations have not been presented for these acquisitions, because the effects of these transactions
were not material. The results of operations of these acquired companies have been included in our statements of consolidated
income from the date of acquisition.
The remaining change in goodwill for both the International Package and Supply Chain & Freight segments was due to
the impact of changes in the value of the U.S. Dollar on the translation of non-U.S. Dollar goodwill balances.
Goodwill Impairment
We test our goodwill for impairment annually, as of October 1st, on a reporting unit basis. Our reporting units are
comprised of the Europe, Asia, and Americas reporting units in the International Package reporting segment, and the
Forwarding, Logistics, UPS Freight, MBE / The UPS Store, and UPS Capital reporting units in the Supply Chain & Freight
reporting segment.
In assessing our goodwill for impairment, we initially evaluate qualitative factors to determine if it is more likely than not
that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment is not conclusive and it is
necessary to calculate the fair value of a reporting unit, then we utilize a two-step process to test goodwill for impairment. First,
a comparison of the fair value of the applicable reporting unit with the aggregate carrying value, including goodwill, is
performed. We primarily determine the fair value of our reporting units using a discounted cash flow model, and supplement
this with observable valuation multiples for comparable companies, as applicable. If the carrying amount of a reporting unit
exceeds the reporting unit’s fair value, we perform the second step of the goodwill impairment test to determine the amount of
impairment loss. The second step includes comparing the implied fair value of the affected reporting unit’s goodwill with the
carrying value of that goodwill.
We did not have any goodwill impairment charges in 2012, 2011 or 2010. Cumulatively, our Supply Chain & Freight
reporting segment has recorded goodwill impairment charges of $622 million, while our International and U.S. Domestic
Package segments have not recorded any impairment charges.