World Fuel Services 2004 Annual Report Download - page 61

Property and Equipment
Property and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization
are calculated on a straight-line basis over the estimated useful lives of the assets as follows:
Years
Leasehold and improvements 5 – 10
Office equipment, furniture, computer equipment and software 3 – 7
Costs of major additions and improvements, including appropriate interest, are capitalized and expenditures for
maintenance and repairs, which do not extend the life of the asset, are expensed. Upon sale or disposition of property and
equipment, the cost and related accumulated depreciation and amortization are eliminated from the accounts and any resulting
gain or loss is credited or charged to income. Long-lived assets held and used by us are reviewed based on market factors and
operational considerations for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable.
Computer software costs, including website development costs, are accounted for under Statement of Position (“SOP”)
98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use” and Emerging Issues Task
Force (“EITF”) Issue No. 00-2, “Accounting for Web Site Development Costs.” SOP 98-1 established criteria for determining
which costs of developing or obtaining internal-use computer software should be charged to expense and which should be
capitalized. EITF Issue No. 00-2 states that the accounting for specific web site development costs should be based on a
model consistent with SOP 98-1. As of December 31, 2004 and 2003, capitalized computer software costs, including web site
development costs, amounted to $1.5 million and $928 thousand, net of accumulated amortization of $5.8 million and $4.8
million, respectively.
Goodwill and Identifiable Intangible Assets
Goodwill represents our cost in excess of net assets, including identifiable intangible assets, of the acquired companies
and the PAFCO aviation joint venture. The identifiable intangible assets for customer relations existing at the date the
acquisitions were recorded and are being amortized over their useful lives of five to seven years. We account for goodwill and
identifiable intangible assets in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill
and Other Intangible Assets.” Among other provisions, SFAS No. 142 states that goodwill shall not be amortized
prospectively. Accordingly, no goodwill amortization was recorded subsequent to the adoption of SFAS No. 142 in April
2001. We recorded amortization of our identifiable intangible asset of $1.2 million for the year ended December 31, 2004,
$368 thousand for the years ended December 31, 2003 and 2002, and $276 thousand for the nine months ended December 31,
2002. The future estimated amortization of our identifiable intangible assets is as follows (in thousands):
For the Year ending December 31,
2005 $ 1,448
2006 1,448
2007 1,080
2008 1,080
2009 1,080
Thereafter 1,350
$ 7,486
In accordance with SFAS No. 142, goodwill must be reviewed annually (or more frequently under certain circumstances)
for impairment. The initial step of the goodwill impairment test compares the fair value of a reporting unit with its carrying
amount, including goodwill. Based on results of these comparisons as of December 31, 2004, goodwill in each of our
reporting units is not considered impaired. Accordingly, no impairment charges were recognized.
Revenue Recognition
Revenue is recognized when fuel deliveries are made and title passes to the customer, or as fuel related services are
performed.
Income Taxes
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