United Healthcare 2015 Annual Report Download - page 68

Pharmacy benefit costs and administrative costs under the contract are expensed as incurred and are recognized
in medical costs and operating costs, respectively, in the Consolidated Statements of Operations.
The final 2015 risk-share amount is expected to be settled during the second half of 2016, and is subject to the
reconciliation process with CMS.
The Consolidated Balance Sheets include the following amounts associated with the Medicare Part D program:
December 31, 2015 December 31, 2014
(in millions) Subsidies Drug Discount Risk-Share Subsidies Drug Discount Risk-Share
Other current receivables .......... $ 1,703 $ 423 $ — $ 1,801 $ 719 $ 20
Other policy liabilities ............. — 58 496 — 302 —
Property, Equipment and Capitalized Software
Property, equipment and capitalized software are stated at cost, net of accumulated depreciation and
amortization. Capitalized software consists of certain costs incurred in the development of internal-use software,
including external direct costs of materials and services and applicable payroll costs of employees devoted to
specific software development.
The Company calculates depreciation and amortization using the straight-line method over the estimated useful
lives of the assets. The useful lives for property, equipment and capitalized software are:
Furniture, fixtures and equipment ......................................... 3to7years
Buildings ............................................................. 35to40years
Capitalized software .................................................... 3to5years
Leasehold improvements are depreciated over the shorter of the remaining lease term or their estimated useful
economic life.
Goodwill
To determine whether goodwill is impaired, annually or more frequently if needed, the Company performs a
multi-step impairment test. First, the Company estimates the fair values of its reporting units using discounted
cash flows. To determine fair values, the Company must make assumptions about a wide variety of internal and
external factors. Significant assumptions used in the impairment analysis include financial projections of free
cash flow (including significant assumptions about operations, capital requirements and income taxes), long-term
growth rates for determining terminal value and discount rates. Comparative market multiples are used to
corroborate the results of the discounted cash flow test. If the fair value is less than the carrying value of the
reporting unit, then the implied value of goodwill would be calculated and compared to the carrying amount of
goodwill to determine whether goodwill is impaired.
During 2015, the Company changed its annual quantitative goodwill impairment testing date from January 1 to
October 1 of each year. The change in the goodwill impairment test date better aligns the impairment testing
procedures with the timing of the Company’s long-term planning process, which is a significant input to the
testing. This change in testing date did not delay, accelerate, or avoid a goodwill impairment charge.
There was no impairment of goodwill during the year ended December 31, 2015.
Intangible Assets
The Company’s intangible assets are subject to impairment tests when events or circumstances indicate that an
intangible asset (or asset group) may be impaired. The Company’s indefinite lived intangible assets are also
tested for impairment annually. There was no impairment of intangible assets during the year ended
December 31, 2015.
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