Western Union 2010 Annual Report Download - page 71

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Description Judgments and Uncertainties
Effect if Actual Results Differ from
Assumptions
Acquisitions—Purchase Price
Allocation
We allocate the purchase price of
an acquired business to its
identifiable assets and liabilities
based on estimated fair values.
The excess of the purchase price
over the amount allocated to the
assets and liabilities is recorded as
goodwill.
For most acquisitions, we engage
outside appraisal firms to assist in
the fair value determination of
identifiable intangible assets such
as agent networks, customer
relationships, tradenames and any
other significant assets or
liabilities. We adjust the
preliminary purchase price
allocation, as necessary, after the
acquisition closing date through
the end of the measurement period
of one year or less as we finalize
valuations for the assets acquired
and liabilities assumed.
Purchase price allocation requires
management to make assumptions
and apply judgment to estimate
the fair value of acquired assets
and liabilities. Management
estimates the fair value of assets
and liabilities primarily using
discounted cash flows and
replacement cost analysis.
During the last three years, we
completed the following
significant acquisitions:
• In September 2009, we
acquired Custom House for
$371.0 million.
• In February 2009, we acquired
the money transfer business of
FEXCO for $243.6 million.
See Note 4, Acquisitions,tothe
Notes to the Consolidated
Financial Statements, included in
Item 8, of this Annual Report on
Form 10-K, for more information
related to the purchase price
allocations for acquisitions
completed during the last three
years.
If estimates or assumptions used
to complete the purchase price
allocation and estimate the fair
value of acquired assets and
liabilities significantly differed
from assumptions made, the
allocation of purchase price
between goodwill and intangibles
could significantly differ. Such a
difference would impact future
earnings through amortization
expense of these intangibles. In
addition, if forecasts supporting
the valuation of the intangibles or
goodwill are not achieved,
impairments could arise, as
discussed further in “Goodwill
Impairment Testing” and “Other
Intangible Assets” above. For all
of our acquisitions during the
three years ended December 31,
2010, goodwill of $496.2 million
and intangibles of $208.7 million
were recognized.
69