HR Block 2005 Annual Report Download - page 125

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Goodwill and other indefinite life intangible assets were tested for impairment in the fourth quarter of fiscal year 2005. An
independent valuation firm was engaged to assist in the test for selected reporting units. No impairment existed at any of our reporting
units during fiscal year 2005 or 2004. In light of unsettled market conditions and the severe decline of comparable business valuations in
the investment industry, we engaged an independent valuation firm in fiscal year 2003 to perform the goodwill impairment test on the
Investment Services segment in accordance with SFAS 142. Based on this valuation, a goodwill impairment charge of $108.8 million was
recorded during fiscal year 2003. Also during 2003, our annual impairment test resulted in an impairment of $13.5 million for a reporting
unit within the Business Services segment. No other impairments were identified.
The goodwill and intangible assets previously included in Corporate as of April 30, 2004 have been reclassified to the Tax Services
segment to more appropriately reflect our segment reporting.
The components of intangible assets are as follows:
(in 000s)
April 30, 2005 2004 (Restated)
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Net Amount Amortization Net
Tax Services:
Customer relationships $ 23,717 $ (7,207) $ 16,510 $ 19,011 $ (3,377) $ 15,634
Noncompete agreements 17,677 (11,608) 6,069 17,364 (5,724) 11,640
Business Services:
Customer relationships 130,585 (68,433) 62,152 121,229 (56,313) 64,916
Noncompete agreements 27,796 (11,274) 16,522 27,424 (8,670) 18,754
Trade name – amortizing 1,450 (995) 455 1,450 (926) 524
Trade name – non-amortizing 55,637 (4,868) 50,769 55,637 (4,868) 50,769
Investment Services:
Customer relationships 293,000 (198,385) 94,615 293,000 (161,760) 131,240
$ 549,862 $ (302,770) $ 247,092 $ 535,115 $ (241,638) $ 293,477
Amortization of intangible assets for the years ended April 30, 2005, 2004 and 2003 was $61.4 million, $61.5 million and $51.8 million,
respectively. Estimated amortization of intangible assets for fiscal years 2006, 2007, 2008, 2009 and 2010 is $60.6 million, $51.6 million,
$34.4 million, $11.7 million and $9.8 million, respectively.
NOTE 8: PROPERTY AND EQUIPMENT
The components of property and equipment are as follows: Depreciation and amortization expense for 2005, 2004 and 2003
(in 000s) was $122.5 million, $117.6 million and $117.3 million, respectively.
Restated Included in depreciation and amortization expense is
April 30, 2005 2004 amortization of capitalized software of $23.6 million, $28.2 million
Land $ 23,716 $ 29,925 and $29.9 million, respectively.
Buildings 67,031 71,923 As of April 30, 2005 and 2004, we have property and equipment
Computers and other equipment 568,986 498,373 under capital lease with a cost of $16.8 million and $14.1 million,
Capitalized software 153,794 137,784 respectively, and accumulated depreciation of $4.2 million and
Leasehold improvements 175,048 114,537 $2.5 million, respectively. We have an agreement to lease real
988,575 852,542 estate and buildings under a noncancelable capital lease for the
Less: Accumulated depreciation and amortization 658,425 579,239 next 16 years with an option to purchase after three years.
$ 330,150 $ 273,303
H&R BLOCK 2005 Form 10K
63