Western Union 2011 Annual Report Download - page 86

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
identifiable assets less liabilities and
noncontrolling interests 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 acquisitions:
• In November 2011, we acquired
TGBP for $967.8 million.
• In October 2011, we acquired Finint
for total value of $187.2 million.
• In April 2011, we acquired Costa
for total value of $181.9 million.
• In September 2009, we acquired
Custom House for $371.0 million.
• In February 2009, we acquired the
money transfer business of FEXCO
Group for $243.6 million.
See Note 3, Acquisitions, to the 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 initial purchase price
allocation and estimate the fair value of
acquired assets and liabilities
significantly differed from assumptions
made in the final valuation, 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,
2011, goodwill of $1,509.0 million and
intangibles of $608.9 million were
recognized.
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