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10-K
INTERPUBLIC GROUP OF COMPANIES, INC. filed this Form 10-K on 02/23/2015
Entire Document
 

Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)
(Amounts in Millions, Except Per Share Amounts)



These estimates and assumptions may vary between each reporting unit depending on the facts and circumstances specific to that unit. The discount rate for each reporting unit is influenced by general market conditions as well as factors specific to the reporting unit. For the 2014 test, the discount rates we used for our reporting units tested were between 11.5% and 12.0%, and the terminal value growth rate for all four of our reporting units tested was 3.0%. The terminal value growth rate represents the expected long-term growth rate for the advertising and marketing services industry, incorporating the type of services the reporting unit provides, and the global economy. For the 2014 test, the revenue growth rates for our reporting units used in our analysis were generally between 3.0% and 6.0%. Factors influencing the revenue growth rates include the nature of the services the reporting unit provides for its clients, the geographic locations in which the reporting unit conducts business and the maturity of the reporting unit. We believe that the estimates and assumptions we made are reasonable, but they are susceptible to change from period to period. Actual results of operations, cash flows and other factors will likely differ from the estimates used in our valuation, and it is possible that differences and changes could be material. A deterioration in profitability, adverse market conditions, significant client losses, changes in spending levels of our existing clients or a different economic outlook than currently estimated by management could have a significant impact on the estimated fair value of our reporting units and could result in an impairment charge in the future.
We also perform a sensitivity analysis to detail the impact that changes in assumptions may have on the outcome of the first step of the impairment test. Our sensitivity analysis provides a range of fair value for each reporting unit, where the low end of the range reduces growth rates by 0.25% and increases discount rates by 0.5%, and the high end of the range increases growth rates by 0.25% and decreases discount rates by 0.5%. We use the average of our fair values for purposes of our comparison between carrying value and fair value for the first step of the quantitative impairment test.
The table below displays the goodwill midpoint of the range for each reporting unit tested in the 2014 and 2013 annual impairment tests. Our results of the comparison between carrying value and fair value at the average fair value indicated that for the 2014 test there were no reporting units and for the 2013 test there was one reporting unit whose fair value exceeded its carrying value by less than 20%.
 
 
2014 Impairment Test
 
 
 
2013 Impairment Test
Reporting Unit
 
Goodwill
 
Fair value exceeds carrying value by:
 
Reporting Unit
 
Goodwill
 
Fair value exceeds carrying value by:
A
 
$
548.4

 
> 50%
 
A
 
$
583.4

 
> 25%
B
 
$
66.8

 
> 85%
 
B
 
$
496.1

 
> 660%
C
 
$
25.8

 
> 180%
 
C
 
$
209.1

 
> 35%
D
 
$
150.0

 
> 55%
 
D
 
$
25.8

 
> 255%
 
 
 
 
 
 
E
 
$
197.3

 
> 30%
 
 
 
 
 
 
F
 
$
182.1

 
> 50%
 
 
 
 
 
 
G
 
$
66.8

 
> 10%
Additionally, we performed a sensitivity analysis and reviewed the carrying values compared to the high end and low end of the valuation range. The table below displays the range of the sensitivity analysis for each reporting unit tested in the 2014 and 2013 annual impairment tests. For the 2014 test, using the low end of the valuation range, there were no reporting units whose fair value exceeded its carrying value by less than 20%. For the 2013 test, using the low end of the valuation range, there were two reporting units whose fair value exceeded its carrying value by less than 20%, but not less than 0%.
 
 
2014 Impairment Test
 
 
 
2013 Impairment Test
Reporting Unit
 
Goodwill
 
Fair value exceeds carrying value by:
 
Reporting Unit
 
Goodwill
 
Fair value exceeds carrying value by:
 
 
 
 
Low
 
High
 
 
 
 
 
Low
 
High
A
 
$
548.4

 
> 45%
 
> 55%
 
A
 
$
583.4

 
> 15%
 
> 30%
B
 
$
66.8

 
> 80%
 
> 95%
 
B
 
$
496.1

 
> 600%
 
> 700%
C
 
$
25.8

 
> 170%
 
> 190%
 
C
 
$
209.1

 
> 30%
 
> 40%
D
 
$
150.0

 
> 45%
 
> 60%
 
D
 
$
25.8

 
> 240%
 
> 275%
 
 
 
 
 
 
 
 
E
 
$
197.3

 
> 20%
 
> 35%
 
 
 
 
 
 
 
 
F
 
$
182.1

 
> 40%
 
> 60%
 
 
 
 
 
 
 
 
G
 
$
66.8

 
> 2%
 
> 20%

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