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GIS » Topics » A change in the assumptions used to value our reporting units or our indefinite-lived intangible assets could negatively affect our consolidated results of operations and net worth.These excerpts taken from the GIS 10-K filed Jul 11, 2008. A
change in the assumptions used to value our reporting units or
our indefinite-lived intangible assets could negatively affect
our consolidated results of operations and net worth.
Goodwill for each of our reporting units is tested for
impairment annually and whenever events or changes in
circumstances indicate that impairment may have occurred. We
compare the carrying value of the net assets of a reporting
unit, including goodwill, to the fair value of the unit. If the
fair value of the net assets of the reporting unit is less than
the net assets including goodwill, impairment has occurred. Our
estimates of fair value are determined based on a discounted
cash flow model. Growth rates for sales and profits are
determined using inputs from our annual long-range planning
process. We also make estimates of discount rates, perpetuity
growth assumptions, market comparables, and other factors. While
we currently believe that our goodwill is not impaired,
materially different assumptions regarding the future
performance of our businesses could result in significant
impairment losses.
We evaluate the useful lives of our intangible assets, primarily
intangible assets associated with the Pillsbury,
Totino’s, Progresso, Green Giant,
Old El Paso, Häagen-Dazs, and Uncle
Tobys brands, to determine if they are finite or
indefinite-lived. Reaching a determination on useful life
requires significant judgments and assumptions regarding the
future effects of obsolescence, demand, competition, other
economic factors (such as the stability of the industry, known
technological advances, legislative action that results in an
uncertain or changing regulatory environment, and expected
changes in distribution channels), the level of required
maintenance expenditures, and the expected lives of other
related groups of assets.
Our indefinite-lived intangible assets are also tested for
impairment annually and whenever events or changes in
circumstances indicate that their carrying value may not be
recoverable. Our estimate of the fair value of the brands is
based on a discounted cash flow model using inputs including:
projected revenues from our annual long-range plan; assumed
royalty rates which could be payable if we did not own the
brands; and a discount rate. While we currently believe that the
fair value of each indefinite-lived intangible asset exceeds its
carrying value and that those intangibles so classified will
contribute indefinitely to our cash flows, materially different
assumptions regarding the future performance of our businesses
could result in significant impairment losses and amortization
expense.
A change in the assumptions used to value our reporting units or our indefinite-lived intangible assets could negatively affect our consolidated results of operations and net worth. Goodwill for each of our reporting units is tested for impairment annually and whenever events or changes in circumstances indicate that impairment may have occurred. We compare the carrying value of the net assets of a reporting unit, including goodwill, to the fair value of the unit. If the fair value of the net assets of the reporting unit is less than the net assets including goodwill, impairment has occurred. Our estimates of fair value are determined based on a discounted cash flow model. Growth rates for sales and profits are determined using inputs from our annual long-range planning process. We also make estimates of discount rates, perpetuity growth assumptions, market comparables, and other factors. While we currently believe that our goodwill is not impaired, materially different assumptions regarding the future performance of our businesses could result in significant impairment losses. We evaluate the useful lives of our intangible assets, primarily intangible assets associated with the Pillsbury, Totino’s, Progresso, Green Giant, Old El Paso, Häagen-Dazs, and Uncle Tobys brands, to determine if they are finite or indefinite-lived. Reaching a determination on useful life requires significant judgments and assumptions regarding the future effects of obsolescence, demand, competition, other economic factors (such as the stability of the industry, known technological advances, legislative action that results in an uncertain or changing regulatory environment, and expected changes in distribution channels), the level of required maintenance expenditures, and the expected lives of other related groups of assets. Our indefinite-lived intangible assets are also tested for impairment annually and whenever events or changes in circumstances indicate that their carrying value may not be recoverable. Our estimate of the fair value of the brands is based on a discounted cash flow model using inputs including: projected revenues from our annual long-range plan; assumed royalty rates which could be payable if we did not own the brands; and a discount rate. While we currently believe that the fair value of each indefinite-lived intangible asset exceeds its carrying value and that those intangibles so classified will contribute indefinitely to our cash flows, materially different assumptions regarding the future performance of our businesses could result in significant impairment losses and amortization expense. | EXCERPTS ON THIS PAGE:
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