World Fuel Services 2005 Annual Report Download - page 61

WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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. Property and
equipment and their respective estimated useful lives are as follows (in thousands, except estimated useful lives):
As of December 31, Estimated
Useful Lives2004 2005
Leasehold improvements .................... $ 2,577 $ 3,649 5 - 10 years
Office equipment, furniture, computer
equipment and software ................... 16,637 22,080 3 - 7 years
19,214 25,729
Accumulated depreciation and amortization ..... (12,122) (14,150)
$ 7,092 $ 11,579
Costs of major additions and improvements, including appropriate interest, are capitalized while
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 system and 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.
Also included in capitalized computer software costs are software development in progress costs of $1.1 million
and $4.0 million as of December 31, 2004 and 2005. Amortization of these costs will begin when the software is
developed and placed in service.
Goodwill and Identifiable Intangible Assets
Goodwill represents our cost in excess of net assets of the acquired companies and the joint venture interest
in PAFCO amounted to $42.3 million and $42.1 million at December 31, 2004 and 2005, respectively. We
recorded identifiable intangible assets for customer relationships existing at the date of the acquisitions.
Identifiable intangible assets are being amortized over their useful lives that range from five to seven years.
Identifiable intangible assets were $7.5 million and $6.0 million, net of accumulated amortization of $1.9 million
and $3.4 million at December 31, 2004 and 2005, respectively. We account for goodwill and identifiable
intangible assets in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.” Among other
provisions, SFAS No. 142 states that goodwill shall not be amortized prospectively.
In accordance with SFAS No. 142, goodwill is reviewed annually at year-end (or more frequently under
certain circumstances) for impairment. The initial step of the goodwill impairment test compares the fair value of
a reporting unit, which is the same as our reporting segment, with its carrying amount, including goodwill. The
fair value of our reporting segment is estimated using discounted cash flow and market capitalization
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