UPS 2013 Annual Report Download - page 97

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
85
NOTE 6. BUSINESS ACQUISITIONS, GOODWILL AND INTANGIBLE ASSETS
The following table indicates the allocation of goodwill by reportable segment (in millions):
U.S. Domestic
Package International Package Supply Chain & Freight Consolidated
Balance on January 1, 2012 $ — $ 361 $ 1,740 $ 2,101
Acquired — 67 — 67
Currency / Other — 2 3 5
Balance on December 31, 2012 $ — $ 430 $ 1,743 $ 2,173
Acquired — 3 20 23
Currency / Other — (13) 7 (6)
Balance on December 31, 2013 $ — $ 420 $ 1,770 $ 2,190
Business Acquisitions
2013 Acquisitions:
The goodwill acquired in the Supply Chain & Freight segment was related to our July 2013 acquisition of Cemelog Ltd.
(“Cemelog”), a Hungary-based medical logistics provider that operates in Central and Eastern Europe. The goodwill acquired
in the International Package segment was largely related to our October 2013 acquisition of the assets and operations of two
Costa Rican-based companies: (1) Union Pak de Costa Rica, S.A., a small package delivery company, and (2) SEISA
Brokerage, a customs brokerage company. Both companies have long-standing relationships with UPS as authorized service
contractors.
2012 Acquisitions:
The goodwill acquired in the International Package segment was related to our February 2012 acquisition of Kiala S.A.
(“Kiala”), a Belgium-based developer of a platform that enables e-commerce retailers to offer their shoppers the option of
having goods delivered to a convenient retail location. Kiala currently operates in Belgium, France, Luxembourg, the
Netherlands and Spain.
Pro forma results of operations have not been presented for these acquisitions in 2013 and 2012, because the effects of
these transactions were not material in either period. The results of operations of these acquired companies have been included
in our statements of consolidated income from the date of acquisition.
The remaining change in goodwill for both the International Package and Supply Chain & Freight segments was due to
the impact of changes in the value of the U.S. Dollar on the translation of non-U.S. Dollar goodwill balances.
Goodwill Impairment
We test our goodwill for impairment annually, as of October 1st, on a reporting unit basis. Our reporting units are
comprised of the Europe, Asia, and Americas reporting units in the International Package reporting segment, and the
Forwarding, Logistics, UPS Freight, MBE / The UPS Store, and UPS Capital reporting units in the Supply Chain & Freight
reporting segment.
In assessing our goodwill for impairment, we initially evaluate qualitative factors to determine if it is more likely than not
that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment is not conclusive and it is
necessary to calculate the fair value of a reporting unit, then we utilize a two-step process to test goodwill for impairment. First,
a comparison of the fair value of the applicable reporting unit with the aggregate carrying value, including goodwill, is
performed. We primarily determine the fair value of our reporting units using a discounted cash flow model, and supplement
this with observable valuation multiples for comparable companies, as applicable. If the carrying amount of a reporting unit
exceeds the reporting unit’s fair value, we perform the second step of the goodwill impairment test to determine the amount of
impairment loss. The second step includes comparing the implied fair value of the affected reporting unit’s goodwill with the
carrying value of that goodwill.