Neiman Marcus 2003 Annual Report Download - page 54

NOTE 3. Goodwill and Intangible Assets
The significant components of goodwill and intangible assets, included in other assets in the accompanying consolidated balance
sheets, are as follows:
(in thousands)
July 31,
2004
August 2,
2003
Goodwill $ 23,747 $ 23,747
Trademarks 64,945 68,797
$ 88,692 $ 92,544
The Company adopted the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets" as of the beginning of the first
quarter of 2003. SFAS No. 142 established a new fair value-based accounting model for the valuation of goodwill and indefinite-lived
intangible assets recorded in connection with business combinations. Pursuant to the provisions of SFAS No. 142, goodwill and
indefinite-lived intangible assets are measured for impairment by applying a fair value-based test at least annually and are not
amortized.
In connection with the adoption of the provisions of SFAS No. 142, the Company engaged third-party appraisal experts to assist with
the determination of the fair value of its goodwill and intangible assets. Fair value was determined using a discounted cash flow
methodology. For each of the Company's operating segments, a summary of the intangible assets recorded by the Company as of the
beginning of the first quarter of 2003 in accordance with the cost-based accounting model established by previous accounting
principles and the adjustments required during 2003 and 2004 in accordance with the fair value model of SFAS No. 142 are as
follows:
Carrying
Value at SFAS No. 142 Adjustments Adjusted
August 4, At During During Carrying
(in thousands) 2002 Adoption 2003 2004 Value
Direct Marketing
Goodwill $ 23,747 $ — $ — $ — $ 23,747
Indefinite-lived tradenames 60,732 (24,066) (813) (3,853) 32,000
Other
Indefinite-lived tradenames 32,945 — — — 32,945
$ 117,424 $ (24,066)$ (813)$ (3,853)$ 88,692
The $24.1 million writedown in the carrying value of the indefinite-lived intangible assets of the Company's Direct Marketing
segment required upon adoption of SFAS No. 142 is reflected as a change in accounting principle ($14.8 million, net of taxes) in the
accompanying consolidated statements of earnings. The additional writedowns of $0.8 million in 2003 (included in selling, general
and administrative expenses) and $3.9 million in 2004 were required based upon current estimates of future cash flows.
The Company ceased amortization of its goodwill and indefinite-lived intangible assets as of the beginning of 2003. Amortization
expense was approximately $5.3 million in 2002 and reduced diluted earnings per share by $0.07 for the period.
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