Humana 2007 Annual Report Download - page 70

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The Government segment consists of beneficiaries of government benefit programs, and includes three lines of
business: Medicare, Military, and Medicaid. The Commercial segment consists of members enrolled in our
medical and specialty products marketed to employer groups and individuals. Goodwill is assigned to the
reporting unit that is expected to benefit from a specific acquisition.
Our strategy, long-range business plan, and annual planning process support our goodwill impairment tests.
These tests are based primarily on an evaluation of future discounted cash flows under several scenarios.
Outcomes from the discounted cash flow analysis were compared to other market approach valuation
methodologies for reasonableness. We used a range of discount rates that correspond to a market-based
weighted-average cost of capital. Key assumptions, including changes in membership, premium yields, medical
cost trends and certain government contract extensions, are consistent with those utilized in our long-range
business plan and annual planning process. If these assumptions differ from actual, the estimates underlying our
goodwill impairment tests could be adversely affected. Goodwill impairment tests completed in each of the last
three years did not result in an impairment loss.
Long-lived assets consist of property and equipment and other finite-lived intangible assets. These assets are
depreciated or amortized over their estimated useful life, and are subject to impairment reviews. We periodically
review long-lived assets whenever adverse events or changes in circumstances indicate the carrying value of the
asset may not be recoverable. In assessing recoverability, we must make assumptions regarding estimated future
cash flows and other factors to determine if an impairment loss may exist, and, if so, estimate fair value. We also
must estimate and make assumptions regarding the useful life we assign to our long-lived assets. If these
estimates or their related assumptions change in the future, we may be required to record impairment losses or
change the useful life, including accelerating depreciation or amortization for these assets. There were no
impairment losses in the last three years. See Note 6 to the consolidated financial statements included in
Item 8.—Financial Statements and Supplementary Data.
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