UPS 2014 Annual Report Download - page 99

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
87
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, 2013 $ — $ 430 $ 1,743 $ 2,173
Acquired — 3 20 23
Currency / Other — (13)7
(6)
Balance on December 31, 2013 $ — $ 420 $ 1,770 $ 2,190
Acquired — 52 13 65
Currency / Other — (23)(48)(71)
Balance on December 31, 2014 $ — $ 449 $ 1,735 $ 2,184
Business Acquisitions
2014 Acquisitions:
The goodwill acquired in the International Package segment was related to our October 2014 acquisition of i-parcel, LLC.
("i-parcel"), a U.S.-based international e-commerce enabler and logistics company that operates in the U.S. and U.K. The
goodwill acquired in the Supply Chain & Freight segment was related to our February 2014 acquisition of Polar Speed
Distribution Limited ("Polar Speed"), a U.K.-based company that provides temperature-sensitive pharmaceutical supply chain
solutions in the U.K. and continental Europe.
The purchase price allocation for acquired companies can be modified for up to one year from the date of acquisition.
The acquisition of Polar Speed and i-parcel were not material to our consolidated financial position or results of operations.
2013 Acquisitions:
The goodwill acquired in the Supply Chain & Freight segment was related to our July 2013 acquisition of Cemelog Ltd.
(“Cemelog”), a Hungary-based medical logistics provider that operates in Central and Eastern Europe. The goodwill acquired
in the International Package segment was largely related to our October 2013 acquisition of the assets and operations of two
Costa Rican-based companies: (1) Union Pak de Costa Rica, S.A., a small package delivery company, and (2) SEISA
Brokerage, a customs brokerage company. Both companies had long-standing relationships with UPS as authorized service
contractors.
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, Americas and ISMEA (Indian Subcontinent, Middle East and Africa) reporting units in the
International Package reporting segment, and the Forwarding, Logistics, UPS Freight, 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.