GE 2009 Annual Report Download - page 84

82 GE 2009 ANNUAL REPORT
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Changes in goodwill balances follow.
2009 2008
(In millions)
Balance
January 1
Acquisitions
acquisition
accounting
adjustments
/
Dispositions,
currency
exchange
and other
Balance
December 31
Balance
January 1
Acquisitions
acquisition
accounting
adjustments
/
Dispositions,
currency
exchange
and other
Balance
December 31
Energy Infrastructure $ 9,943 $ (166) $ 344 $10,121 $ 9,960 $ 750 $ (767) $ 9,943
Technology Infrastructure 26,684 460 (1,465) 25,679 26,130 1,116 (562) 26,684
NBC Universal 18,973 26 (18,999) — 18,733 403 (163) 18,973
Capital Finance 25,365 3,225 371 28,961 25,427 2,024 (2,086) 25,365
Consumer & Industrial 794 — 19 813 866 — (72) 794
Total $81,759 $3,545 $(19,730) $65,574 $81,116 $4,293 $(3,650) $81,759
Goodwill related to new acquisitions in 2009 was $3,417 million
and included acquisitions of BAC Credomatic GECF Inc. (BAC)
($1,605 million) and Interbanca S.p.A. ($1,394 million) at Capital
Finance and Airfoils Technologies International — Singapore Pte. Ltd.
(ATI-Singapore) ($342 million) at Technology Infrastructure. During
2009, the goodwill balance increased by $128 million related to
acquisition accounting adjustments for prior-year acquisitions.
The most significant of these adjustments was an increase of
$180 million associated with the 2008 acquisition of CitiCapital
at Capital Finance, partially offset by a decrease of $141 million
associated with the 2008 acquisition of Hydril Pressure Control
by Energy Infrastructure. Also during 2009, goodwill balances
decreased $19,730 million, primarily as a result of NBCU and our
Security business being classified as held for sale ($19,001 million)
and ($1,077 million), respectively, by the deconsolidation of PTL
($634 million) at Capital Finance and the disposition of 81% of GE
Homeland Protection, Inc. ($423 million) at Technology Infrastructure,
partially offset by weaker U.S. dollar ($1,666 million).
On March 20, 2009, we increased our ownership in ATI-Singapore
from 49% to 100% and concurrently acquired from the same seller
a controlling financial interest in certain affiliates. We remeasured
our previous equity interests to fair value, resulting in a pre-tax
gain of $254 million, which is reported in other income.
On June 25, 2009, we increased our ownership in BAC from
49.99% to 75% for a purchase price of $623 million, in accordance
with terms of a previous agreement. We remeasured our previously
held equity investment to fair value, resulting in a pre-tax gain of
$343 million, which is reported in GECS revenues from services.
Goodwill balances increased $3,694 million in 2008 from new
acquisitions. The most significant increases related to acquisitions
of Hydril Pressure Control ($725 million) at Energy Infrastructure,
Merrill Lynch Capital ($643 million) at Capital Finance, Vital Signs
($594 million) and Whatman plc. ($592 million) at Technology
Infrastructure, Bank BPH ($470 million) at Capital Finance, CDM
Resource Management, Ltd. ($229 million) at Capital Finance and
CitiCapital ($166 million) at Capital Finance. During 2008, the
goodwill balance increased by $599 million related to acquisition
accounting adjustments for prior-year acquisitions. The most
significant of these adjustments were increases of $267 million
and $171 million associated with the 2007 acquisitions of Oxygen
Media Corp. by NBC Universal and Sanyo Electric Credit Co., Ltd.
by Capital Finance, respectively. In 2008, goodwill balances
decreased $2,639 million as a result of the stronger U.S. dollar.
Upon closing an acquisition, we estimate the fair values of
assets and liabilities acquired and consolidate the acquisition as
quickly as possible. Given the time it takes to obtain pertinent
information to finalize the acquired company’s balance sheet,
then to adjust the acquired company’s accounting policies,
procedures, and books and records to our standards, it is often
several quarters before we are able to finalize those initial fair
value estimates. Accordingly, it is not uncommon for our initial
estimates to be subsequently revised.
Given the significant decline in our stock price in the first
quarter of 2009 and market conditions in the financial services
industry at that time, we conducted an additional impairment
analysis of the Capital Finance reporting units during the first
quarter of 2009 using data as of January 1, 2009. As a result of
these tests, no goodwill impairment was recognized.
We performed our annual impairment test for goodwill at all
of our reporting units in the third quarter using data as of July 1,
2009. In performing the valuations, we used cash flows that
reflected management’s forecasts and discount rates that reflect
the risks associated with the current market. Based on the results
of our testing, the fair values at each of the GE Industrial report-
ing units and the CLL, Consumer, Energy Financial Services and
GECAS reporting units exceeded their book values; therefore,
the second step of the impairment test (in which fair value of
each of the reporting unit’s assets and liabilities are measured)
was not required to be performed and no goodwill impairment
was recognized. Due to the volatility and uncertainties in the
current commercial real estate environment, we used a range of
valuations to determine the fair value for our Real Estate reporting
unit. While the Real Estate reporting unit’s book value was within
the range of its fair value, we further substantiated our Real
Estate goodwill balance by performing the second step analysis
described above. As a result of our tests for Real Estate, no good-
will impairment was recognized. Our Real Estate reporting unit
had a goodwill balance of $1,189 million at December 31, 2009.
Estimating the fair value of reporting units involves the use
of estimates and significant judgments that are based on a
number of factors including actual operating results. If current
conditions change from those expected, it is reasonably possible
that the judgments and estimates described above could change
in future periods.