Goodwill and Intangible Assets Accounting Policy
Walt Disney is required to test goodwill and other indefinite-lived intangible assets for impairment on an annual basis and if current events or circumstances require, on an interim basis. Goodwill is allocated to various reporting units, which are generally an operating segment or one level below the operating segment. Walt Disney compares the fair value of each reporting unit to its carrying amount to determine if there is potential goodwill impairment. If the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the fair value of the goodwill within the reporting unit is less than the carrying value of the goodwill.
To determine the fair value of reporting units, Walt Disney generally uses a present value technique (discounted cash flow) corroborated by market multiples when available and as appropriate. Walt Disney applies what Walt Disney believes to be the most appropriate valuation methodology for each of reporting units. Walt Disney includes in the projected cash flows an estimate of the revenue Walt Disney believes the reporting unit would receive if the intellectual property developed by the reporting unit that is being used by other reporting units was licensed to an unrelated third party at its fair market value. These amounts are not necessarily the same as those included in segment operating results.
In times of adverse economic conditions in the global economy, Walt Disney's long-term cash flow projections are subject to a greater degree of uncertainty than usual. If Walt Disney had established different reporting units or utilized different valuation methodologies or assumptions, the impairment test results could differ, and Walt Disney could be required to record impairment charges.
Walt Disney is required to compare the fair values of other indefinite-lived intangible assets to their carrying amounts. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized. Fair values of other indefinite-lived intangible assets are determined based on discounted cash flows or appraised values, as appropriate.
Walt Disney tests long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in circumstances (triggering events) indicate that the carrying amount may not be recoverable. Once a triggering event has occurred, the impairment test employed is based on whether the intent is to hold the asset for continued use or to hold the asset for sale. The impairment test for assets held for use requires a comparison of cash flows expected to be generated over the useful life of an asset group against the carrying value of the asset group. An asset group is established by identifying the lowest level of cash flows generated by a group of assets that are largely independent of the cash flows of other assets and could include assets used across multiple businesses or segments. If the carrying value of the asset group exceeds the estimated undiscounted future cash flows, an impairment would be measured as the difference between the fair value of the group's long-lived assets and the carrying value of the group's long-lived assets. The impairment is allocated to the long-lived assets of the group on a pro rata basis using the relative carrying amount, but only to the extent the carrying value of each asset is above its fair value. For assets held for sale, to the extent the carrying value is greater than the asset's fair value less costs to sell, an impairment loss is recognized for the difference.
During fiscal years 2011 and 2010, Walt Disney tested its goodwill and other intangible assets for impairment, and the impairment charges recorded were not material. During fiscal year 2009, Walt Disney recorded an impairment charge of $142 million related to FCC radio licenses and a goodwill impairment charge totaling $29 million. The FCC radio license impairment charges reflected overall market declines in certain radio markets in which Walt Disney operates. The FCC radio license and goodwill impairment charges, which were determined based on a discounted cash flow model, were recorded in "Restructuring and impairment charges" in the Consolidated Statements of Income.
Amortizable intangible assets are generally amortized on a straight-line basis over periods up to 40 years. The costs to periodically renew Walt Disney's intangible assets are expensed as incurred. Walt Disney has determined that there are currently no legal, competitive, economic or other factors that materially limit the useful life of FCC licenses and trademarks.
Source: Walt Disney Co., Annual Report
Goodwill and Intangible Assets Disclosure
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Walt Disney Co., Statement of Financial Position, Goodwill and Intangible Assets
Source: Based on data from Walt Disney Co. Annual Reports
| Item |
Description |
The company |
| Intangible assets |
Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. |
Walt Disney Co.'s intangible assets increased from 2009 to 2010 and from 2010 to 2011.
|
| Goodwill |
Carrying amount as of the balance sheet date, which is the cumulative amount paid and (if applicable) the fair value of any noncontrolling interest in the acquiree, adjusted for any amortization recognized prior to the adoption of any changes in generally accepted accounting principles (as applicable) and for any impairment charges, in excess of the fair value of net assets acquired in one or more business combination transactions. |
Walt Disney Co.'s goodwill increased from 2009 to 2010 and from 2010 to 2011.
|
| Goodwill and other intangible assets |
Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. |
Walt Disney Co.'s goodwill and other intangible assets increased from 2009 to 2010 and from 2010 to 2011.
|
Analyst Adjustments: Removal of Goodwill
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Walt Disney Co., adjustments to financial data
Adjusted Ratios: Removal of Goodwill (Summary)
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Walt Disney Co., adjusted ratios
| Ratio |
Description |
The company |
| Adjusted net profit margin |
An indicator of profitability, calculated as adjusted net income divided by revenue. |
Walt Disney Co.'s adjusted net profit margin improved from 2009 to 2010 and from 2010 to 2011.
|
| Adjusted total asset turnover |
An activity ratio calculated as total revenue divided by adjusted total assets. |
Walt Disney Co.'s adjusted total asset turnover deteriorated from 2009 to 2010 but then slightly improved from 2010 to 2011.
|
| Adjusted financial leverage |
A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income. |
Walt Disney Co.'s adjusted financial leverage declined from 2009 to 2010 but then increased from 2010 to 2011 exceeding 2009 level.
|
| Adjusted ROE |
A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. |
Walt Disney Co.'s adjusted ROE improved from 2009 to 2010 and from 2010 to 2011.
|
| Adjusted ROA |
A profitability ratio calculated as adjusted net income divided by adjusted total assets. |
Walt Disney Co.'s adjusted ROA improved from 2009 to 2010 and from 2010 to 2011.
|
Adjusted Net Profit Margin
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2011 Calculations
| Ratio |
Description |
The company |
| Adjusted net profit margin |
An indicator of profitability, calculated as adjusted net income divided by revenue. |
Walt Disney Co.'s adjusted net profit margin improved from 2009 to 2010 and from 2010 to 2011.
|
Adjusted Total Asset Turnover
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2011 Calculations
| Ratio |
Description |
The company |
| Adjusted total asset turnover |
An activity ratio calculated as total revenue divided by adjusted total assets. |
Walt Disney Co.'s adjusted total asset turnover deteriorated from 2009 to 2010 but then slightly improved from 2010 to 2011.
|
Adjusted Financial Leverage
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2011 Calculations
| Ratio |
Description |
The company |
| Adjusted financial leverage |
A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income. |
Walt Disney Co.'s adjusted financial leverage declined from 2009 to 2010 but then increased from 2010 to 2011 exceeding 2009 level.
|
Adjusted Return On Equity (ROE)
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2011 Calculations
| Ratio |
Description |
The company |
| Adjusted ROE |
A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. |
Walt Disney Co.'s adjusted ROE improved from 2009 to 2010 and from 2010 to 2011.
|
Adjusted Return On Assets (ROA)
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2011 Calculations
| Ratio |
Description |
The company |
| Adjusted ROA |
A profitability ratio calculated as adjusted net income divided by adjusted total assets. |
Walt Disney Co.'s adjusted ROA improved from 2009 to 2010 and from 2010 to 2011.
|
