United Healthcare 2013 Annual Report Download - page 59

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earnings growth, retention rates, perpetuity growth rates and discount rates. These initial valuations and the
embedded assumptions contain uncertainty to the extent that those assumptions and estimates may ultimately
differ from actual results (e.g., customer turnover may be higher or lower than the assumed retention rate
suggested).
Our finite-lived intangible assets are subject to impairment tests when events or circumstances indicate that an
asset’s (or asset group’s) carrying value may exceed its estimated fair value. Consideration is given on a
quarterly basis to a number of potential impairment indicators including: changes in the use of the assets, changes
in legal or other business factors that could affect value, experienced or expected operating cash-flow
deterioration or losses, adverse changes in customer populations, adverse competitive or technological advances
that could impact value, and other factors. Following the identification of any potential impairment indicators, we
would calculate the estimated fair value of a finite-lived intangible asset (or asset group) using the undiscounted
cash flows that are expected to result from the use of the asset or related group of assets. If it is determined that
an impairment exists, the amount by which the carrying value exceeds its estimated fair value would be recorded
as an impairment.
Our indefinite-lived intangible assets are tested for impairment on an annual basis, or more frequently if
impairment indicators exist. To determine if an indefinite-lived intangible asset is impaired, we assess qualitative
factors to determine whether the existence of events and circumstances indicates that it is more-likely-than-not
that the indefinite-lived intangible asset’s carrying value exceeds its fair value. If, after assessing the totality of
events and circumstances, we conclude that it is not more likely than not that the indefinite-lived intangible
asset’s carrying value exceeds its fair value, no impairment exists and no further testing is performed. If we
conclude otherwise, we would perform a quantitative analysis by comparing its estimated fair value to its
carrying value. If the carrying value exceeds its estimated fair value, an impairment would be recorded for the
amount by which the carrying value exceeds its estimated fair value. Intangible assets were not materially
impaired in 2013.
Investments
As of December 31, 2013, we had investments with a carrying value of $21.5 billion, primarily held in
marketable debt securities. Our investments are principally classified as available-for-sale and are recorded at fair
value. We exclude gross unrealized gains and losses on available-for-sale investments from net earnings and
report net unrealized gains or losses, net of income tax effects, as other comprehensive income and as a separate
component in shareholders’ equity. We continually monitor the difference between the cost and fair value of our
investments. As of December 31, 2013, our available-for-sale investments had gross unrealized gains of $326
million and gross unrealized losses of $234 million.
For debt securities, if we intend to either sell or determine that we will be more likely than not be required to sell
the security before recovery of the entire amortized cost basis or maturity of the security, we recognize the entire
impairment in earnings. If we do not intend to sell the debt security and we determine that we will not be more
likely than not be required to sell the debt security but we do not expect to recover the entire amortized cost
basis, the impairment is bifurcated into the amount attributed to the credit loss, and recognized in net earnings,
and all other causes, and recognized in other comprehensive income.
For equity securities, we recognize impairments in other comprehensive income if we expect to hold the equity
security until fair value increases to at least the equity security’s cost basis and we expect that increase in fair
value to occur in a reasonably forecasted period. If we intend to sell the equity security or if we believe that
recovery of fair value to cost will not occur in the near term, we recognize the impairment in net earnings.
The most significant judgments and estimates related to investments are related to determination of their fair
values and the other-than-temporary impairment assessment.
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