Kodak 2008 Annual Report Download - page 69

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NOTE 5: GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill was $896 million and $1,657 million as of December 31, 2008 and 2007, respectively. The changes in the carrying amount
of goodwill by reportable segment for 2007 and 2008 were as follows:
(in millions) Consumer Film,
Digital Photofinishing
Graphic
Imaging and Entertainment
Communications
Consolidated
Group Group
Group
Total
Balance as of December 31, 2006 $ 196 $ 575
$ 813
$ 1,584
Additions - -
2
2
Purchase accounting adjustments - -
38
38
Divestiture - -
(19)
(19)
Currency translation adjustments 8 26
18
52
Balance as of December 31, 2007 $ 204 $ 601
$ 852
$ 1,657
Additions - -
25
25
Purchase accounting adjustments - -
3
3
Currency translation adjustments (9) 12
(7)
(4)
Impairments - -
(785)
(785)
Balance as of December 31, 2008 $ 195 $ 613
$88
$ 896
The Company tests goodwill for impairment annually (on September 30), or whenever events occur or circumstances change that
would more likely than not reduce the fair value of a reporting unit below its carrying amount, by initially comparing the fair value of
each of the Company’s reporting units to their related carrying values (step one).
Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. The Company estimates the
fair value of its reporting units utilizing income and market approaches through the application of discounted cash flow and market
comparable methods.
Based upon the results of its September 30, 2008 analysis, no impairment of goodwill was indicated.
As of December 31, 2008, due to the continuing challenging business conditions and the significant decline in its market
capitalization during the fourth quarter of 2008, the Company concluded there was an indication of possible impairment. Based on its
updated analysis, the Company concluded that there was an impairment of goodwill related to the Graphic Communications Group
segment and, thus, recorded a pre-tax impairment charge of $785 million in the fourth quarter of 2008 that was included in Other
operating expenses (income), net in the Consolidated Statement of Operations.
The fair values of reporting units within the Company’s Consumer Digital Imaging Group (CDG) and Film, Photofinishing and
Entertainment Group (FPEG) segments, and one of the two GCG reporting units were greater than their respective carrying values
as of December 31, 2008, so no goodwill impairment was recorded for these reporting units. Reasonable changes in the
assumptions used to determine these fair values would not have resulted in goodwill impairments in any of these reporting units.
The aggregate amount of goodwill additions of $25 million was primarily attributable to $14 million for the purchase of Intermate A/S
and $10 million for the purchase of Design2Launch in the second quarter of 2008, all within the Graphic Communications Group
segment. Refer to Note 21, “Acquisitions.”
Due to the realignment of the Kodak operating model and change in reporting structure, as described in Note 23, “Segment
Information,” effective January 1, 2008, the Company reassigned goodwill to its reportable segments using a relative fair value
approach as required under SFAS No. 142, “Goodwill and Other Intangible Assets.” Prior period amounts have been restated to
reflect this reassignment.
During the second quarter of 2007, the Company identified a deferred tax asset in a non-U.S. subsidiary that was overstated at the
date of acquisition, resulting in an increase in the value of goodwill of $24 million and is presented as a purchase accounting
adjustment in the table above. In the fourth quarter of 2007, the Company recorded a $14 million increase in the value of goodwill to
correct the purchase price allocations to property, plant and equipment and deferred tax assets in a non-U.S. subsidiary that was
overstated at the date of acquisition. This correction is presented as a purchase accounting adjustment in the table above.
The divestiture in 2007 of $19 million relates to the sale of the Company’s interest in Hermes Precisa Pty. Ltd. (“HPA”). See Note 22,
“Discontinued Operations,” for further details.