eTrade 2007 Annual Report Download - page 118

The following table discloses the changes in the carrying value of goodwill that occurred in the retail and
institutional segments (dollars in thousands):
Retail Institutional Total
Balance at December 31, 2005 $1,761,848 $ 241,608 $2,003,456
Purchase accounting adjustments related to 2005 acquisitions 11,953 — 11,953
Additions from 2006 acquisition of RAA(1) 14,116 — 14,116
Additions from equity method investment in Investsmart(2) 38,668 4,296 42,964
Other adjustments 1,500 (1,069) 431
Balance at December 31, 2006 1,828,085 244,835 2,072,920
Impairment of goodwill — (101,208) (101,208)
Reclass of equity method investment in Investsmart(2) (38,668) (4,296) (42,964)
Write off of goodwill related to exit activities — (3,741) (3,741)
Purchase accounting and other adjustments 6,191 2,170 8,361
Balance at December 31, 2007 $1,795,608 $ 137,760 $1,933,368
(1) Includes purchase accounting adjustments as of December 31, 2006.
(2) The $43.0 million of goodwill related to Investsmart was reclassified to the other assets line item during 2007. See Note 11—Other
Assets for further discussion.
For the year ended December 31, 2007, the changes in the carrying value of goodwill are the result of the
Company recognizing an impairment of goodwill related the Company’s Balance Sheet Management business.
The impairment of goodwill for this business occurred during the fourth quarter of 2007, and was due primarily
to the crisis in the residential real-estate and credit markets. The method used for determining the fair value of
Balance Sheet Management was a combination of prices for comparable businesses and the expected present
value of future cash flows of the business. In addition, there was a write-off of goodwill related to certain exit
activities (see Note 3—Facility Restructuring and Other Exit Activities for further discussion). These decreases
were slightly offset by purchase accounting adjustments related to earn outs and escrow releases on prior
acquisitions that were made by the Company.
For the year ended December 31, 2006, the changes in the carrying value of goodwill are the result of the
Company’s completion of the purchase of RAA (see Note 2—Business Combinations for further discussion). An
additional $12.0 million of goodwill, primarily due to purchase accounting adjustments related to the 2005
acquisitions of BrownCo and Harrisdirect, was also recorded during 2006.
Other intangible assets with finite lives, which are primarily amortized on an accelerated basis, consist of
the following (dollars in thousands):
December 31, 2007 December 31, 2006
Weighted
Average
Useful Life
(Years)
Gross
Amount
Accumulated
Amortization
Net
Amount
Weighted
Average
Useful Life
(Years)
Gross
Amount
Accumulated
Amortization
Net
Amount
Customer list 20 $461,639 $ (75,074) $386,565 20 $461,639 $ (43,076) $418,563
Specialist books 30 61,820 (32,214) 29,606 30 61,820 (30,641) 31,179
Active accounts 7 69,023 (57,153) 11,870 8 69,023 (50,325) 18,698
Other 6 6,000 (4,034) 1,966 6 6,000 (2,507) 3,493
Total other intangible
assets(1) $598,482 $(168,475) $430,007 $598,482 $(126,549) $471,933
(1) Fully amortized other intangible assets not included in the table above.
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