eTrade 2004 Annual Report Download - page 97

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Table of Contents
Index to Financial Statements
NOTE 10—PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following (in thousands):
Depreciation and amortization expense related to property and equipment was $82.9 million for 2004, $89.5 million for 2003 and $104.8
million for 2002.
Included in equipment and transportation, software, buildings and furniture and fixtures, are capital leases (gross), of $3.6 million at
December 31, 2004 and $13.5 million December 31, 2003. Total accumulated amortization of these leases was $3.5 million at December 31,
2004 and $7.4 million at December 31, 2003.
Software includes capitalized internally developed software costs. These costs were $31.8 million for 2004, $41.8 million for 2003 and
$34.0 million for 2002. Completed projects are carried at cost and are amortized on a straight-line basis over their estimated useful lives,
generally four years. Amortization expense for the capitalized amounts was $33.7 million for 2004, $29.3 million for 2003 and $30.1 million
for 2002. Also included in software is $15.1 million of internally developed software in the process of development for which amortization has
not begun.
NOTE 11—GOODWILL AND OTHER INTANGIBLES, NET
December 31,
2004
2003
Equipment and transportation
$
240,517
$
193,723
Software
331,774
293,618
Leasehold improvements
88,066
77,991
Buildings
71,927
73,827
Land
3,428
7,233
Furniture and fixtures
14,340
9,080
Total property and equipment, gross
750,052
655,472
Less accumulated depreciation and amortization
(447,761
)
(368,375
)
Total property and equipment, net
$
302,291
$
287,097
On January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets . Upon initial adoption, the Company
stopped amortizing goodwill, identified its reporting units based on its current segment reporting structure and allocated all recorded goodwill,
as well as other assets and liabilities, to the reporting units. The Company then determined the fair value of its reporting units using discounted
cash flow models and relative market multiples for comparable businesses. The Company compared each reporting unit’s fair value to its
carrying value. This initial evaluation indicated that goodwill was impaired, resulting in a non-cash charge totaling $293.7 million ($(0.82) per
share). This charge was recorded as a cumulative effect of accounting change. In November 2003 and 2004, the Company performed its annual
impairment tests, resulting in no additional impairment.
88