Express Scripts 2014 Annual Report Download - page 52
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In2012,uponreassessmentofthecarryingvaluesofassetsandliabilitiesofEAVbasedontheeventsdescribed
above,werecordedimpairmentchargesassociatedwiththislineofbusinesstotaling$9.5millionofintangiblesassets.The
write-offofintangibleassetswascomprisedofcustomerrelationshipswithacarryingvalueof$3.6million(grossvalueof$5.0
millionlessaccumulatedamortizationof$1.4million)andtradenameswithacarryingvalueof$5.9million(grossvalueof
$7.0millionlessaccumulatedamortizationof$1.1million).EAVwassubsequentlysoldinDecember2012.
In2012,asaresultofourplantodisposeofourLibertylineofbusiness,animpairmentchargetotaling$23.0
millionwasrecordedagainstintangibleassetstoreflectfairvaluebasedonthecontractedsalespriceofthebusiness(Level2).
Thewrite-downwascomprisedofcustomerrelationshipswithacarryingvalueof$24.2million(grossvalueof$35.0million
lessaccumulatedamortizationof$10.8million)andtradenameswithacarryingvalueof$6.6million($7.0millionless
accumulatedamortizationof$0.4million).Thischargewasallocatedtotheseassetsonaproratabasisusingthecarrying
valuesasofSeptember30,2012.LibertywassubsequentlysoldinDecember2012.SeeNote4-DispositionsandNote6-
Goodwillandotherintangiblesforfurtherdescriptionoftheselinesofbusiness.
FACTORSAFFECTINGESTIMATE
Thefairvaluesofreportingunits,assetgroupsoracquiredbusinessesaremeasuredbasedonmarketprices,when
available.Whenmarketpricesarenotavailable,weestimatefairvalueusingtheincomeapproachand/orthemarketapproach.
Theincomeapproachusescashflowprojectionswhichrequireinputsandassumptionsthatreflectcurrentmarketconditionsas
wellasmanagementjudgment.Webaseourfairvaluesonprojectedfinancialinformationwhichwebelievetobereasonable.
However,actualresultsmaydifferfromthoseprojectionsandthosedifferencesmaybematerial.
Thekeyassumptionsincludedinourincomeapproachinclude,butarenotlimitedto,earningsgrowthrates,
discountratesandinflationrates.Assessmentofthesefactorscouldbeimpactedbyinternalfactorsand/orexternaleconomic
conditions.Weperformedvarioussensitivityanalysesonthekeyassumptionswhichdidnotindicateanypotentialimpairment.
ACCOUNTS RECEIVABLE RESERVES
ACCOUNTINGPOLICY
Weprovideanallowancefordoubtfulaccountsequaltoestimateduncollectiblereceivables.Theseestimatesare
basedonthecurrentstatusofeachcustomer’sreceivablebalance.Wealsoprovideacontractualallowanceforcertain
receivablesfromthird-partypayorsbasedonourcollectionexperience.
FACTORSAFFECTINGESTIMATE
Werecordallowancesfordoubtfulaccountsbasedonavarietyoffactorsincludingthelengthoftimethe
receivablesarepastdue,thefinancialhealthofthecustomerandexperience.Ourestimatecouldbeimpactedbychangesin
economicandmarketconditionsaswellaschangestoourcustomers’financialcondition.
SELF-INSURANCE ACCRUALS
ACCOUNTINGPOLICY
Werecordself-insuranceaccrualsbasedonestimatesoftheaggregateliabilityofclaimcostsinexcessofour
insurancecoveragewhichareprobableandestimable.Accrualsareestimatedusingcertainactuarialassumptionsfollowedin
theinsuranceindustryandourexperience.Themajorityoftheseclaimsarelegalclaimsandourliabilityestimateisprimarily
relatedtothecosttodefendtheseclaims.Wedonotaccrueforsettlements,judgments,monetaryfinesorpenaltiesuntilsuch
amountsareprobableandestimable.UnderauthoritativeFASBguidance,iftherangeofpossiblelossisbroad,andnoamount
withintherangeismorelikelythananyother,theliabilityaccrualisbasedonthelowendoftherange.
FACTORSAFFECTINGESTIMATE
Self-insuranceaccrualsarebasedonmanagement’sestimatesofthecoststodefendlegalclaims.Wedonothave
significantexperiencewithcertainofthesetypesofcases.Assuch,differencesbetweenactualcostsandmanagement’s
estimatescouldbesignificant.ActuariesdonothaveasignificanthistorywiththePBMindustry.Therefore,changesto
assumptionsusedinthedevelopmentoftheseaccrualscanaffectnetincomeinagivenperiod.Inaddition,changesinthelegal
environmentandthenumberandnatureofclaimscouldimpactourestimate.
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