World Fuel Services 2012 Annual Report Download - page 77

Goodwill and Identifiable Intangible Assets
Goodwill represents the future earnings and cash flow potential of acquired businesses in excess of the
fair values that are assigned to all other identifiable assets and liabilities. Goodwill arises because the
purchase price paid reflects numerous factors, including the strategic fit and expected synergies these
acquisitions bring to existing operations and the prevailing market value for comparable companies.
Goodwill is not subject to periodic amortization; instead, it is reviewed annually at year-end (or more
frequently under certain circumstances) for impairment. We assess qualitative factors to determine
whether it is more likely than not that the fair value of any individual reporting unit is less than its carrying
amount. In performing the qualitative assessment, we assess relevant events and circumstances that
may impact the fair value of our reporting units, including the following: (i) macroeconomic conditions,
(ii) industry and market considerations, (iii) earnings quality/sustainability, (iv) overall financial
performance, (v) events affecting a reporting unit, (vi) share price and (vii) recent fair value calculation for
our reporting units, if available.
After assessing the above described events and circumstances, if we determine that it is more likely
than not that the fair value of a reporting unit is greater than its carrying value, then no further testing is
required. Otherwise, we would perform the first step of quantitative testing for goodwill impairment.
In connection with our acquisitions, we record identifiable intangible assets existing at the date of the
acquisitions for customer relationships, supplier and non-compete agreements, developed technology
and trademark/trade name rights. Identifiable intangible assets subject to amortization are amortized
over their estimated lives and are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable based on market
factors and operational considerations. For identifiable intangible assets not subject to amortization, we
first assess qualitative factors to determine whether it is more likely than not that an asset has been
impaired. After assessing qualitative factors, if we determine that it is more likely than not that the fair
value of an asset is greater than its carrying value, then no further testing is required. Otherwise, we
would review for impairment by comparing the fair value of the intangible asset to its carrying value.
Other Investments
Our other investments consist primarily of equity investments, net of basis adjustments. These
investments are accounted for under the equity method as we own less than 50 percent of the entities
and exercise significant influence over the investee, but do not have operational or financial control. As of
December 31, 2012, we had other investments, included within non-current other assets, of
$41.7 million.
Extinguishment of Liability
In the normal course of business, we accrue liabilities for fuel and services received for which invoices
have not yet been received. These liabilities are derecognized, or extinguished, if either (i) payment is
made to relieve our obligation for the liability or (ii) we are legally released from our obligation for the
liability, such as when our legal obligations with respect to such liabilities lapse or otherwise no longer
exist. We derecognized vendor liability accruals due to the legal release of our obligations in the amount
of $11.2 million, $8.3 million and $9.8 million during 2012, 2011 and 2010, respectively, which is
reflected as a reduction of cost of revenue in the accompanying consolidated statements of income and
comprehensive income.
Revenue Recognition
Revenue from the sale of fuel and related goods is recognized when the sales price is fixed or
determinable, collectability is reasonably assured and title passes to the customer, which is when the
delivery of fuel is made to our customer directly from us, the supplier or a third-party subcontractor. Our
fuel sales are generated as a fuel reseller as well as from on-hand inventory supply. When acting as a fuel
reseller, we generally purchase fuel from the supplier, mark it up, and contemporaneously resell the fuel
to the customer, normally taking delivery for purchased fuel at the same place and time as the delivery is
made. We record the gross sale of the fuel as we generally take inventory risk, have latitude in
establishing the sales price, have discretion in the supplier selection, maintain credit risk and are the
primary obligor in the sales arrangement.
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