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SEC Filings

10-K
INTERPUBLIC GROUP OF COMPANIES, INC. filed this Form 10-K on 02/22/2016
Entire Document
 

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



 
 
2015 Impairment Test
 
 
 
2014 Impairment Test
Reporting Unit
 
Goodwill
 
Fair value exceeds carrying value by:
 
Reporting Unit
 
Goodwill
 
Fair value exceeds carrying value by:
A
 
$
25.8

 
> 135%
 
A
 
$
548.4

 
> 50%
B
 
$
4.9

 
> 275%
 
B
 
$
66.8

 
> 85%
 
 
 
 
 
 
C
 
$
25.8

 
> 180%
 
 
 
 
 
 
D
 
$
150.0

 
> 55%
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 2015 and 2014 annual impairment tests. For both the 2015 and 2014 tests, using the low end of the valuation range, there were no reporting units whose fair value exceeded its carrying value by less than 20%.
 
 
2015 Impairment Test
 
 
 
2014 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
 
$
25.8

 
> 125%
 
> 140%
 
A
 
$
548.4

 
> 45%
 
> 55%
B
 
$
4.9

 
> 265%
 
> 285%
 
B
 
$
66.8

 
> 80%
 
> 95%
 
 
 
 
 
 
 
 
C
 
$
25.8

 
> 170%
 
> 190%
 
 
 
 
 
 
 
 
D
 
$
150.0

 
> 45%
 
> 60%
Based on the analysis described above, for the reporting units for which we performed the first step of the quantitative impairment test, we concluded that our goodwill was not impaired as of October 1, 2015, because these reporting units passed the first step of the test as the fair values of each of the reporting units were substantially in excess of their respective net book values.
We review intangible assets with definite lives subject to amortization whenever events or circumstances indicate that a carrying amount of an asset may not be recoverable. Recoverability of these assets is determined by comparing the carrying value of these assets to the estimated undiscounted future cash flows expected to be generated by these assets. These assets are impaired when their carrying value exceeds their fair value. Impaired intangible assets with definite lives subject to amortization are written down to their fair value with a charge to expense in the period the impairment is identified. Intangible assets with definite lives are amortized on a straight-line basis with estimated useful lives generally between 7 and 15 years. Events or circumstances that might require impairment testing include the loss of a significant client, the identification of other impaired assets within a reporting unit, loss of key personnel, the disposition of a significant portion of a reporting unit, significant decline in stock price or a significant adverse change in business climate or regulations.

Pension and Postretirement Benefit Plans
We use various actuarial assumptions in determining our net pension and postretirement benefit costs and obligations. Management is required to make significant judgments about a number of actuarial assumptions, including discount rates and expected returns on plan assets, which are updated annually or more frequently with the occurrence of significant events.
The discount rate is a significant assumption that impacts our net pension and postretirement benefit costs and obligations. We determine our discount rates for our domestic pension and postretirement benefit plans and significant foreign pension plans based on either a bond selection/settlement approach or bond yield curve approach. Using the bond selection/settlement approach, we determine the discount rate by selecting a portfolio of corporate bonds appropriate to provide for the projected benefit payments. Using the bond yield curve approach, we determine the discount rate by matching the plans' cash flows to spot rates developed from a yield curve. Both approaches utilize high-quality AA-rated corporate bonds and the plans' projected cash flows to develop a discounted value of the benefit payments, which is then used to develop a single discount rate. In countries where markets for high-quality long-term AA corporate bonds are not well developed, a portfolio of long-term government bonds is used as a basis to develop hypothetical corporate bond yields, which serve as a basis to derive the discount rate.
The discount rate used to calculate net pension and postretirement benefit costs is determined at the beginning of each year. For the year ended December 31, 2015, discount rates of 4.15% for the domestic pension plan and 4.00% for the postretirement benefit plan and a weighted-average discount rate of 3.41% for the significant foreign pension plans were used to calculate 2015 net pension and postretirement benefit costs. A 25 basis point increase or decrease in the discount rate would have decreased or increased the 2015 net pension and postretirement benefit cost by approximately $1.0.

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