US Bank 2005 Annual Report Download - page 61

to Consolidated Financial Statements for additional regulations and capital characteristics of comparable public
information regarding MSRs. companies in relevant industry sectors. In certain
circumstances, management will engage a third-party to
Goodwill and Other Intangibles The Company records all independently validate its assessment of the fair value of its
assets and liabilities acquired in purchase acquisitions, business segments.
including goodwill and other intangibles, at fair value as The Company’s annual assessment of potential
required by Statement of Financial Accounting Standards goodwill impairment was completed during the second
No. 141, ‘‘Goodwill and Other Intangible Assets.’’ quarter of 2005. Based on the results of this assessment, no
Goodwill and indefinite-lived assets are no longer amortized goodwill impairment was recognized.
but are subject, at a minimum, to annual tests for
impairment. Under certain situations, interim impairment Income Taxes The Company estimates income tax expense
tests may be required if events occur or circumstances based on amounts expected to be owed to various tax
change that would more likely than not reduce the fair jurisdictions. Currently, the Company files tax returns in
value of a reporting segment below its carrying amount. approximately 140 federal, state and local domestic
Other intangible assets are amortized over their estimated jurisdictions and 10 foreign jurisdictions. The estimated
useful lives using straight-line and accelerated methods and income tax expense is reported in the Consolidated
are subject to impairment if events or circumstances indicate Statement of Income. Accrued taxes represent the net
a possible inability to realize the carrying amount. estimated amount due or to be received from taxing
The initial recognition of goodwill and other intangible jurisdictions either currently or in the future and are
assets and subsequent impairment analysis require reported in other assets or other liabilities on the
management to make subjective judgments concerning Consolidated Balance Sheet. In estimating accrued taxes, the
estimates of how the acquired assets will perform in the Company assesses the relative merits and risks of the
future using valuation methods including discounted cash appropriate tax treatment considering statutory, judicial and
flow analysis. Additionally, estimated cash flows may extend regulatory guidance in the context of the tax position.
beyond ten years and, by their nature, are difficult to Because of the complexity of tax laws and regulations,
determine over an extended timeframe. Events and factors interpretation can be difficult and subject to legal judgment
that may significantly affect the estimates include, among given specific facts and circumstances. It is possible that
others, competitive forces, customer behaviors and attrition, others, given the same information, may at any point in
changes in revenue growth trends, cost structures, time reach different reasonable conclusions regarding the
technology, changes in discount rates and specific industry estimated amounts of accrued taxes.
and market conditions. In determining the reasonableness of Changes in the estimate of accrued taxes occur
cash flow estimates, the Company reviews historical periodically due to changes in tax rates, interpretations of
performance of the underlying assets or similar assets in an tax laws, the status of examinations being conducted by
effort to assess and validate assumptions utilized in its various taxing authorities, and newly enacted statutory,
estimates. judicial and regulatory guidance that impact the relative
In assessing the fair value of reporting units, the merits and risks of tax positions. These changes, when they
Company may consider the stage of the current business occur, affect accrued taxes and can be significant to the
cycle and potential changes in market conditions in operating results of the Company. Refer to Note 20 of the
estimating the timing and extent of future cash flows. Also, Notes to Consolidated Financial Statements for additional
management often utilizes other information to validate the information regarding income taxes.
reasonableness of its valuations including public market
CONTROLS AND PROCEDURES
comparables, and multiples of recent mergers and
acquisitions of similar businesses. Valuation multiples may Under the supervision and with the participation of the
be based on revenue, price-to-earnings and tangible capital Company’s management, including its principal executive
ratios of comparable public companies and business officer and principal financial officer, the Company has
segments. These multiples may be adjusted to consider evaluated the effectiveness of the design and operation of its
competitive differences including size, operating leverage disclosure controls and procedures (as defined in Rules 13a-
and other factors. The carrying amount of a reporting unit 15(e) and 15d-15(e) under the Securities Exchange Act of
is determined based on the capital required to support the 1934 (the ‘‘Exchange Act’’)). Based upon this evaluation,
reporting unit’s activities including its tangible and the principal executive officer and principal financial officer
intangible assets. The determination of a reporting unit’s have concluded that, as of the end of the period covered by
capital allocation requires management judgment and this report, the Company’s disclosure controls and
considers many factors including the regulatory capital procedures were effective.
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