Goldman Sachs 2004 Annual Report Download - page 82

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notes฀to฀consolidated฀financial฀statements
80฀฀฀G O L D M A N ฀ S A C H S ฀ 2004฀ ANNUAL฀REPO RT
80฀฀฀G O L D M A N ฀ S A C H S ฀ 2 004฀ A N N U A L ฀ R E P O RT
GOODWILL฀
Goodwill is the cost of acquired companies in excess of the fair
value of identifiable net assets at acquisition date. In accordance
with SFAS No. 142, “Goodwill and Other Intangible Assets,”
goodwill is tested at least annually for impairment. An impair-
ment loss is triggered if the estimated fair value of an operating
segment is less than its estimated net book value. Such loss is
calculated as the difference between the implied fair value of
goodwill and its carrying value.
IDENTIFIABLE฀INTANGIBLE฀ ASSETS
Identifiable intangible assets, which consist primarily of
customer lists and specialist rights, are amortized over their
estimated useful lives. Identifiable intangible assets are tested for
potential impairment whenever events or changes in circum-
stances suggest that an asset’s or asset group’s carrying value
may not be fully recoverable in accordance with SFAS No. 144,
“Accounting for the Impairment or Disposal of Long-Lived
Assets.” An impairment loss, calculated as the difference
between the estimated fair value and the carrying value of an
asset or asset group, is recognized if the sum of the estimated
undiscounted cash flows relating to the asset or asset group is
less than the corresponding carrying value.
BES฀•฀Phone฀(201)฀635-5240฀฀•฀FAX฀(201)฀635-5199
BPX/S10829฀•฀Flow฀15฀•฀Proof฀11฀•฀2/4/05฀•฀0700
If the firm were to recognize compensation expense over the relevant service period under the fair-value method of SFAS No. 123
with respect to stock options granted for the year ended November 2002 and all prior years, net earnings would have decreased,
resulting in pro forma net earnings and EPS as presented below:
฀ ฀ YEAR฀ENDED฀NOVEMBER
(IN฀MILLIONS,฀EXCEPT฀PER฀SHARE฀AMOUNTS)฀ 2004฀ 2003฀ 2002
Net earnings, as reported $4,553 $3,005฀ $2,114
Add: Stock-based employee compensation expense, net of
related tax effects, included in reported net earnings 790 458฀ 416
Deduct: Stock-based employee compensation expense, net of
related tax effects, determined under the fair-value
method for all awards (947) (782)฀ (785)
Pro forma net earnings $4,396 $2,681฀ $1,745
EPS, as reported
Basic $฀฀9.30 $฀ 6.15฀ $฀ 4.27
Diluted 8.92 5.87฀ 4.03
Pro forma EPS
Basic $฀฀8.98 $฀ 5.49฀ $฀ 3.52
Diluted 8.61 5.24฀ 3.32