World Fuel Services 2013 Annual Report Download - page 59

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.
From time to time, we may perform the first step of quantitative testing for goodwill impairment in lieu of performing a qualitative
assessment. The first step of the goodwill impairment test compares the estimated fair value of a reporting unit with its carrying value.
We estimate the fair value of a reporting unit using discounted cash flows and market capitalization methodologies.
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 useful lives and are reviewed for impairment and appropriate
remaining useful lives 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. We also have a note receivable from our crude oil joint venture partner, which is not significant. As of
December 31, 2013 and 2012, we had other investments of $83.8 million and $41.7 million, respectively, which are included within
identifiable intangible and other non-current assets.
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 $8.5 million,
$11.2 million and $8.3 million during 2013, 2012 and 2011, 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 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, 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 to the customer. 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.
Revenue from fuel-related services is recognized when services are performed, the sales price is fixed or determinable and
collectability is reasonably assured. We record the gross sale of fuel-related services as we generally have latitude in establishing the
sales price, have discretion in supplier selection, maintain credit risk and are the primary obligor in the sales arrangement.
Commission from fuel broker services is recognized when services are performed and collectability is reasonably assured. When
acting as a fuel broker, we are paid a commission by the supplier.
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