HR Block 2010 Annual Report Download - page 67

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Property and equipment included above and subject to capital lease arrangements included the following:
As of April 30, 2010 2009
(in 000s)
Property and equipment under capital lease $ 47,844 $ 47,913
Less accumulated amortization (31,418) (25,368)
$ 16,426 $ 22,545
Depreciation and amortization expense of continuing operations for fiscal years 2010, 2009 and 2008 was
$96.9 million, $96.6 million and $90.1 million, respectively. Included in depreciation and amortization expense of
continuing operations is amortization of capitalized software of $21.8 million, $23.4 million and $19.9 million,
respectively.
NOTE 8: GOODWILL AND INTANGIBLE ASSETS
Changes in the carrying amount of goodwill by segment for the years ended April 30, 2010 and 2009 are as follows:
Tax Services Business Services Total
(in 000s)
Balance at May 1, 2008:
Goodwill $ 431,981 $ 399,333 $ 831,314
Accumulated impairment losses – – –
431,981 399,333 831,314
Changes:
Acquisitions 22,692 3,306 25,998
Disposals and foreign currency changes (4,894) – (4,894)
Impairments (2,188) – (2,188)
Balance at April 30, 2009:
Goodwill 449,779 402,639 852,418
Accumulated impairment losses (2,188) – (2,188)
447,591 402,639 850,230
Changes:
Acquisitions 5,136 1,112 6,248
Disposals and foreign currency changes (1,031) – (1,031)
Impairments – (15,000) (15,000)
Balance at April 30, 2010:
Goodwill 453,884 403,751 857,635
Accumulated impairment losses (2,188) (15,000) (17,188)
$ 451,696 $ 388,751 $ 840,447
Goodwill and other indefinite-life intangible assets were tested for impairment in the fourth quarter of fiscal year
2010.
RSM EquiCo is a separate reporting unit within our Business Services segment with goodwill totaling
$29.3 million. RSM EquiCo assists clients with capital markets transactions and has experienced declining
revenues and profitability in the current economic environment. Accordingly, we evaluated RSM EquiCo’s
goodwill for impairment at January 31, 2010. The measurement of impairment of goodwill consists of two
steps. In the first step, we compared the fair value of RSM EquiCo, determined using discounted cash flows, to its
carrying value. As the results of the first test indicated that the fair value of RSM EquiCo was less than its carrying
value, we then performed the second step, which was to determine the implied fair value of RSM EquiCo’s
goodwill, and to compare that to its carrying value. The second step included hypothetically valuing all of the
tangible and intangible assets of RSM EquiCo. As a result, we recorded an impairment of the reporting unit’s
goodwill of $15.0 million, leaving a remaining goodwill balance of $14.3 million. The impairment is included in
selling, general and administrative expenses on the consolidated statements of operations.
We have a separate reporting unit within our Tax Services segment with a goodwill balance totaling $28.6 million
at April 30, 2010. Operating activities of the business consist principally of the development and sale of commercial
tax preparation software. The estimated fair value of this reporting unit exceeded its carrying value by
approximately 8% at April 30, 2010. If revenues or pretax results of this reporting unit fall below our
expectations, we may be required to consider impairment of the carrying value of its goodwill.
We recorded a $2.2 million goodwill impairment in our Tax Services segment in fiscal year 2009, which was a
result of the closure of a previously acquired business.
H&R BLOCK 2010 Form 10K 51