During the second
quarter of fiscal 2003, we completed the transitional requirements for
goodwill impairment testing. As a result of the transitional goodwill
impairment testing, we determined that the book value of the assets of
our Musicland and Magnolia Hi-Fi businesses, which were acquired in
the fourth quarter of fiscal 2001, exceeded their current fair values.
We determine fair values utilizing widely accepted valuation
techniques, including discounted cash flow and market multiple
analyses. We based Musiclands fair value on the then-current
expectations for the business in light of the existing retail
environment and the uncertainty associated with future trends in
prerecorded music products. We based Magnolia Hi-Fis fair value on
the then-current expectations for the business in light of recent
sales trends and the then-existing business environment, including an
economic slowdown in the Pacific Northwest. The resulting after-tax,
non-cash impairment charge was $348, of which $308 was associated with
Musicland and $40 was associated with Magnolia Hi-Fi. The charge
represented a complete write-off of the goodwill associated with these
businesses. As described in note 2, we have classified the results of
operations of our Musicland subsidiary as discontinued operations,
including the related goodwill impairment charge.
In the fourth quarter of fiscal 2003, we completed our annual
impairment testing of goodwill related to our acquisition of Future
Shop using the same techniques as described above, and determined
there was no impairment.
The only significant identifiable intangible asset included in our
balance sheet is an indefinite-lived intangible trade name related to
Future Shop.
The changes in the
carrying amount of goodwill by segment for continuing operations were
as follows:
