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These excerpts taken from the GIS 10-K filed Jul 11, 2008. Intangible
Assets Goodwill is not subject to
amortization and is tested for impairment annually and whenever
events or changes in circumstances indicate that impairment may
have occurred. Impairment testing is performed for each of our
reporting units. We compare the carrying value of a reporting
unit, including goodwill, to the fair value of the unit.
Carrying value is based on the assets and liabilities associated
with the operations of that reporting unit, which often requires
allocation of shared or corporate items among reporting units.
If the carrying amount of a reporting unit exceeds its fair
value, we revalue all assets and liabilities of the reporting
unit, excluding goodwill, to determine if the fair value of the
net assets is greater than the net assets including goodwill. If
the fair value of the net assets 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.
We evaluate the useful lives of our other intangible assets,
mainly 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, mainly brands, are also
tested for impairment annually and whenever events or changes in
circumstances indicate that their carrying value may not be
Table of Contents
recoverable. We performed our fiscal 2008 assessment of our
brand intangibles as of December 1, 2007. Our estimate of
the fair value of the brands was based on a discounted cash flow
model using inputs which included: projected revenues from our
annual long-range plan; assumed royalty rates that could be
payable if we did not own the brands; and a discount rate. All
brand intangibles had fair values in excess of their carrying
values by at least 20 percent, except for the Pillsbury
brand, which we estimated had a fair value 3 percent
higher than its carrying value. This brand comprises nearly
one-half of our total indefinite-lived intangible assets.
If the growth rate for the global revenue from all uses of the
Pillsbury brand decreases 50 basis points from the
current planned growth rate, fair value would be reduced by
approximately $150 million, assuming all other components
of the fair value estimate remain unchanged. If the assumed
royalty rate for all uses of the Pillsbury brand
decreases by 50 basis points, fair value would be reduced
by approximately $130 million, assuming all other
components of the fair value estimate remain unchanged. If the
applicable discount rate increases by 50 basis points, fair
value of the Pillsbury brand would be reduced by
approximately $170 million, assuming all other components
of the fair value estimate remain unchanged. As of May 25,
2008, we reviewed each of the assumptions used in the annual
impairment assessment performed as of December 1, 2007, and
found them to still be appropriate.
As of May 25, 2008, we had $10.6 billion of goodwill
and indefinite-lived intangible assets. While we currently
believe that the fair value of each intangible exceeds its
carrying value and that those intangibles so classified will
contribute indefinitely to our cash flows, materially different
assumptions regarding future performance of our businesses could
result in significant impairment losses and amortization expense.
Intangible Assets Goodwill is not subject to amortization and is tested for impairment annually and whenever events or changes in circumstances indicate that impairment may have occurred. Impairment testing is performed for each of our reporting units. We compare the carrying value of a reporting unit, including goodwill, to the fair value of the unit. Carrying value is based on the assets and liabilities associated with the operations of that reporting unit, which often requires allocation of shared or corporate items among reporting units. If the carrying amount of a reporting unit exceeds its fair value, we revalue all assets and liabilities of the reporting unit, excluding goodwill, to determine if the fair value of the net assets is greater than the net assets including goodwill. If the fair value of the net assets 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. We evaluate the useful lives of our other intangible assets, mainly 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, mainly brands, are also tested for impairment annually and whenever events or changes in circumstances indicate that their carrying value may not be
Table of Contentsrecoverable. We performed our fiscal 2008 assessment of our brand intangibles as of December 1, 2007. Our estimate of the fair value of the brands was based on a discounted cash flow model using inputs which included: projected revenues from our annual long-range plan; assumed royalty rates that could be payable if we did not own the brands; and a discount rate. All brand intangibles had fair values in excess of their carrying values by at least 20 percent, except for the Pillsbury brand, which we estimated had a fair value 3 percent higher than its carrying value. This brand comprises nearly one-half of our total indefinite-lived intangible assets. If the growth rate for the global revenue from all uses of the Pillsbury brand decreases 50 basis points from the current planned growth rate, fair value would be reduced by approximately $150 million, assuming all other components of the fair value estimate remain unchanged. If the assumed royalty rate for all uses of the Pillsbury brand decreases by 50 basis points, fair value would be reduced by approximately $130 million, assuming all other components of the fair value estimate remain unchanged. If the applicable discount rate increases by 50 basis points, fair value of the Pillsbury brand would be reduced by approximately $170 million, assuming all other components of the fair value estimate remain unchanged. As of May 25, 2008, we reviewed each of the assumptions used in the annual impairment assessment performed as of December 1, 2007, and found them to still be appropriate. As of May 25, 2008, we had $10.6 billion of goodwill and indefinite-lived intangible assets. While we currently believe that the fair value of each intangible exceeds its carrying value and that those intangibles so classified will contribute indefinitely to our cash flows, materially different assumptions regarding future performance of our businesses could result in significant impairment losses and amortization expense. This excerpt taken from the GIS 10-Q filed Mar 20, 2008. Intangible Assets Goodwill represents the difference between the purchase price of acquired companies and the related fair values of net assets acquired. Goodwill is not subject to amortization and is tested for impairment annually and whenever events or changes in circumstances indicate that impairment may have occurred. Impairment testing is performed for each of our reporting units. We compare the carrying value of a reporting unit, including goodwill, to the fair value of the unit. Carrying value is based on the assets and liabilities associated with the operations of that reporting unit, which often requires allocation of shared or corporate items among reporting units. If the carrying amount of a reporting unit exceeds its fair value, we revalue all assets and liabilities of the reporting unit, excluding goodwill, to determine if the fair value of the net assets is greater than the net assets including goodwill. If the fair value of the net assets 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. We periodically engage third-party valuation consultants to assist in this process. Finite and indefinite-lived assets, primarily intangible assets associated with the Pillsbury, Totino’s, Progresso, Green Giant, Old El Paso and Häagen-Dazs brands, are also tested for impairment annually and whenever events or changes in circumstances indicate that their carrying value may not be recoverable. In the third quarter of fiscal 2008, we completed our fiscal 2008 annual assessment of our brand intangibles as of December 1, 2007. Our estimate of the fair value of the brands was based on a discounted cash flow model using inputs which included: (1) projected revenues from our annual long-range plan; (2) assumed royalty rates which could be payable if we did not own the brands; and (3) a discount rate. All brand intangibles had fair values in excess of their carrying values by at least 20 percent, except for the Pillsbury brand, which we estimated had a fair value that was three percent higher than its carrying value. This brand comprises nearly one-half of our total indefinite-lived intangible assets. 31 If the growth rate for the global revenue from all uses of the Pillsbury brand decreases 50 basis points from the current planned growth rate, fair value of the brand would be reduced by approximately $150 million, assuming all other components of the fair value estimate remain unchanged. If the assumed royalty rate for all uses of the Pillsbury brand decreases by 50 basis points, fair value of the brand would be reduced by approximately $130 million, assuming all other components of the fair value estimate remain unchanged. If the applicable discount rate increases by 50 basis points, fair value of the Pillsbury brand would be reduced by approximately $170 million, assuming all other components of the fair value estimate remain unchanged. | EXCERPTS ON THIS PAGE:
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