Xerox 2015 Annual Report Download - page 52

business to be predominantly services-based.
Our impairment assessment methodology includes the use of outside valuation experts and the inclusion of factors
and assumptions related to third-party market participants. When performing our market approach for each
reporting unit, we rely specifically on the guideline public company method. Our guideline public company method
incorporates revenues and earnings multiples from publicly traded companies with operations and other
characteristics similar to each reporting unit. The selected multiples consider each reporting unit’s relative growth,
profitability, size and risk relative to the selected publicly traded companies.
After completing our annual impairment reviews for each reporting unit in the fourth quarter of 2015 and 2014, we
concluded that goodwill was not impaired in either of these years. Although we experienced a decline in the fair
values of our reporting units in 2015 as compared to 2014, with the exception of the Commercial Services and the
Commercial Healthcare Services reporting units, no reporting unit had an excess of fair value over carrying value of
less than 20%.
The excess of reporting unit fair values over carrying values for our Commercial Services reporting unit (which has
approximately $2.0 billion of goodwill) was significantly less than in prior years with an excess of fair value over
carrying value of approximately 17%. Although we experienced a similar 2015 decline in fair value in our
Commercial Healthcare Services reporting unit (which has approximately $900 million of goodwill), that decline is
expected to be mitigated by synergies and operational improvements resulting from the combination of this
reporting unit with the Government Healthcare Services reporting unit in 2016. We will continue to monitor the
impact of economic, market and industry factors impacting these reporting units in 2016. The decrease in fair values
for these reporting units was largely due to the mix of services and pricing pressures not being matched with cost
reductions from productivity and restructuring actions. However, both of these reporting units operate in key growth
segments of the business process outsourcing market, and the 2016 expectation is that through an increased focus
on revenue and cost management both businesses will reflect improved performance and a corresponding increase
in fair value.
Subsequent to our fourth quarter impairment test, we did not identify any indicators of potential impairment that
required an update to the annual impairment test.
Refer to Note 10 - Goodwill and Intangible Assets, Net in the Consolidated Financial Statements for additional
information regarding goodwill by reportable segment.
35