Equifax 2009 Annual Report Download - page 32

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued
Goodwill and Indefinite-Lived Intangible Assets require assumptions about short- and long-term revenue growth
We review goodwill and indefinite-lived intangible assets for impair- rates, operating margins for each reporting unit, discount rates, for-
ment annually (as of September 30) and whenever events or eign currency exchange rates and estimates of capital charges. The
changes in circumstances indicate the carrying value of an asset assumptions we use are based on what we believe a hypothetical
may not be recoverable. These events or circumstances could marketplace participant would use in estimating fair value. Under the
include a significant change in the business climate, legal factors, market approach, we estimate the fair value based on market multi-
operating performance or trends, competition, or sale or disposition ples of revenue or earnings for benchmark companies. We believe
of a significant portion of a reporting unit. We have ten reporting the benchmark companies used for each of the reporting units
units comprised of Consumer Information Solutions (which includes serve as an appropriate input for calculating a fair value for the
Mortgage Solutions and Consumer Financial Marketing Services), reporting unit as those benchmark companies have similar risks,
Direct Marketing Services, Europe, Latin America, Canada Con- participate in similar markets, provide similar services for their cus-
sumer, North America Personal Solutions, North America Commer- tomers and compete with us directly. The companies we use as
cial Solutions, The Work Number, Tax Management Services and benchmarks are outlined in our ‘‘Competition’’ discussion included in
Talent Management Services. Effective September 30, 2009, the Item I of our 2009 Annual Report on Form 10-K, including Experian
Consumer Information Solutions and Consumer Financial Marketing Group Limited, The Dun & Bradstreet Corporation, Acxiom Corpora-
Services reporting units were aggregated into a single reporting unit tion, and Harte-Hanks, Inc. Data for the benchmark companies was
to better reflect the economic similarities and customer overlap of obtained from publicly available information. Consumer Information
the two businesses. Prior to aggregation, we assessed the recover- Solutions, our largest reporting unit, as well as Europe and Latin
ability of goodwill for Consumer Information Solutions and Con- America, have benchmark companies that conduct operations of
sumer Financial Marketing Services separately and determined that businesses of a similar type and scope. The Work Number and Tax
the fair value of each reporting unit exceeded its carrying value. Management Services share a different set of benchmark compa-
nies, notably ADP and Paychex Inc., as the markets they serve are
different than those served by our other reporting units. Valuation
The goodwill balance at December 31, 2009, for our ten reporting
multiples were selected based on a financial benchmarking analysis
units was as follows:
that compared the reporting unit’s operating result with the compa-
rable companies’ information. In addition to these financial consider-
December 31, ations, qualitative factors such as variations in growth opportunities
(In millions) 2009 and overall risk among the benchmark companies were considered
in the ultimate selection of the multiple.
Consumer Information Solutions (including
Mortgage Solutions and Consumer Financial
Marketing Services) $ 603.8 The values separately derived from each of the income and market
Direct Marketing Services 64.0 approach valuation techniques were used to develop an overall esti-
Europe 100.3 mate of a reporting unit’s fair value. We use a consistent approach
Latin America 205.7 across all reporting units when considering the weight of the income
Canada Consumer 29.7 and market approaches for calculating the fair value of each of our
North America Personal Solutions 1.8 reporting units. This approach relies more heavily on the calculated
North America Commercial Solutions 37.3 fair value derived from the income approach, with 70% of the value
The Work Number 752.9 coming from the income approach. We believe this approach is
Tax Management Services 121.6 consistent with that of a market participant in valuing prospective
Talent Management Services 26.1 purchase business combinations. The selection and weighting of the
various fair value techniques may result in a higher or lower fair
Total goodwill $ 1,943.2 value. Judgment is applied in determining the weightings that are
most representative of fair value.
Judgments and uncertainties — In determining the fair value of our
reporting units, we used a combination of the income and market We have not made any material changes to the valuation methodol-
approaches to estimate the reporting unit’s business enterprise ogy we use to assess goodwill impairment since the date of the last
value. annual impairment test.
Under the income approach, we calculate the fair value of a report-
ing unit based on estimated future discounted cash flows which
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