Western Union 2012 Annual Report Download - page 82

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77
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 allocations require
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 flow and replacement
cost analyses.
During the last three years, we completed
the following acquisitions:
- We acquired TGBP for $961.3 million.
- We acquired Finint for total value of
$187.1 million.
- We acquired Costa for total value of
$181.9 million.
See Part II, Item 8, Financial Statements
and Supplementary Data, Note 3,
“Acquisitions,” 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, 2012, goodwill of
$1,032.1 million and intangibles of $430.4
million were recognized.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks arising from changes in market rates and prices, including changes in foreign currency exchange
rates and interest rates and credit risk related to our agents and customers. A risk management program is in place to manage these
risks.