United Healthcare 2004 Annual Report Download - page 48

46 UNITEDHEALTH GROUP
PROPERTY, EQUIPMENT AND CAPITALIZED SOFTWARE
Property, equipment and capitalized software is stated at cost, net of accumulated depreciation and
amortization. Capitalized software consists of certain costs incurred in the development of internal-use
software, including external direct costs of materials and services and payroll costs of employees devoted
to specific software development.
We calculate depreciation and amortization using the straight-line method over the estimated useful
lives of the assets. The useful lives for property, equipment and capitalized software are: from three to
seven years for furniture, fixtures and equipment; from 35 to 40 years for buildings; the shorter of the
useful life or remaining lease term for leasehold improvements; and from three to nine years for
capitalized software. The weighted-average useful life of property, equipment and capitalized software
at December 31, 2004, was approximately five years. The net book value of property and equipment was
$543 million and $503 million as of December 31, 2004 and 2003, respectively. The net book value of
capitalized software was $596 million and $529 million as of December 31, 2004 and 2003, respectively.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill represents the amount by which the purchase price and transaction costs of businesses we have
acquired exceed the estimated fair value of the net tangible assets and separately identifiable intangible
assets of these businesses. Goodwill and intangible assets with indefinite useful lives are not amortized,
but are tested at least annually for impairment. Intangible assets with discrete useful lives are amortized
on a straight-line basis over their estimated useful lives.
LONG-LIVED ASSETS
We review long-lived assets, including property, equipment, capitalized software and intangible assets,
for events or changes in circumstances that would indicate we might not recover their carrying value.
We consider many factors, including estimated future utility and cash flows associated with the assets, to
make this decision. An impairment charge is recorded for the amount by which an asset’s carrying value
exceeds its estimated fair value. We record assets held for sale at the lower of their carrying amount or
fair value, less any costs for the final settlement.
OTHER POLICY LIABILITIES
Other policy liabilities include the RSF associated with the AARP program (see Note 11), customer
balances related to experience-rated insurance products and the current portion of future policy benefits
for life insurance and annuity contracts. Customer balances represent excess customer payments and
deposit accounts under experience-rated contracts. At the customer’s option, these balances may be
refunded or used to pay future premiums or claims under eligible contracts.
INCOME TAXES
Deferred income tax assets and liabilities are recognized for the differences between the financial and
income tax reporting bases of assets and liabilities based on enacted tax rates and laws. The deferred
income tax provision or benefit generally reflects the net change in deferred income tax assets and
liabilities during the year, excluding any deferred income tax assets and liabilities of acquired businesses.
The current income tax provision reflects the tax consequences of revenues and expenses currently
taxable or deductible on various income tax returns for the year reported.
FUTURE POLICY BENEFITS FOR LIFE AND ANNUITY CONTRACTS
Future policy benefits for life insurance and annuity contracts represents account balances that accrue
to the benefit of the policyholders, excluding surrender charges, for universal life and investment
annuity products.