Goodwill and Other Intangible Assets

12 Months Ended

May 31, 2011

Goodwill and Other Intangible Assets Abstract

NOTE 4: GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL. The carrying amount of goodwill attributable to each reportable operating segment and changes therein are as follows (in millions):

			FedEx Express Segment		FedEx Ground Segment		FedEx Freight Segment		FedEx Services Segment		Total

Goodwill at May 31, 2009			$	1,090	$	90	$	802	$	1,539	$	3,521
Accumulated impairment charges				-		-		(115)		(1,177)		(1,292)

Balance as of May 31, 2009				1,090		90		687		362		2,229

Impairment charge				-		-		(18)		-		(18)
Purchase adjustments and other⁽¹⁾				(11)		-		-		-		(11)
Transfer between segments⁽²⁾				66		-		(66)		-		-

Balance as of May 31, 2010				1,145		90		603		362		2,200

Goodwill acquired⁽³⁾				89		-		-		-		89
Purchase adjustments and other⁽¹⁾				38		-		(1)		-		37

Balance as of May 31, 2011			$	1,272	$	90	$	602	$	362	$	2,326

Accumulated goodwill impairment
	charges as of May 31, 2011		$	-	$	-	$	(133)	$	(1,177)	$	(1,310)

⁽¹⁾		Primarily currency translation adjustments.
⁽²⁾		Transfer of goodwill related to the merger of Caribbean Transportation Services into FedEx Express effective June 1, 2009.
⁽³⁾		Goodwill acquired in 2011 relates to the acquisition of the Indian logistics, distribution and express businesses of AFL Pvt. Ltd. and its affiliate Unifreight India Pvt. Ltd. See Note 3 for related disclosures.

Our reporting units with significant recorded goodwill include our FedEx Express, FedEx Freight and FedEx Office reporting units. We evaluated these reporting units during the fourth quarter of 2011. The estimated fair value of each of these reporting units exceeded their carrying values in 2011, and we do not believe that any of these reporting units are at risk as of May 31, 2011.

Goodwill Impairment Charges – 2010

In connection with our annual impairment testing of goodwill conducted in the fourth quarter of 2010, we recorded a charge of $18 million for impairment of the value of the remaining goodwill at our FedEx National LTL reporting unit. In connection with the combination of our LTL networks in 2011, this unit was merged into the FedEx Freight reporting unit. The impairment charge resulted from the significant negative impact of the U.S. recession on the LTL industry, which resulted in volume and yield declines and operating losses.

Goodwill Impairment Charges – 2009

FEDEX OFFICE. During 2009, in response to the lower revenues and continued operating losses at FedEx Office resulting from the U.S. recession, the company initiated an internal reorganization designed to improve revenue-generating capabilities and reduce costs including headcount reductions, the termination of operations in some international locations and substantially curtailing future network expansion. Despite these actions, operating losses and weak economic conditions significantly impacted our FedEx Office reporting unit.

In connection with our annual impairment testing in 2009, we concluded that the recorded goodwill was impaired and recorded an impairment charge of $810 million during the fourth quarter of 2009. The goodwill impairment charge is included in 2009 operating expenses in the accompanying consolidated statements of income. This charge was included in the results of the FedEx Services segment and was not allocated to our transportation segments, as the charge was unrelated to the core performance of those businesses.

FEDEX NATIONAL LTL. In 2009, we recorded a goodwill impairment charge of $90 million at our FedEx National LTL unit. This charge was a result of reduced revenues and increased operating losses due to the negative impact of the U.S. recession.

OTHER INTANGIBLE ASSETS. The net book value of our intangible assets was $38 million in 2011 and $69 million in 2010. Amortization expense for intangible assets was $32 million in 2011, $51 million in 2010 and $73 million in 2009. Estimated amortization expense is expected to be immaterial in 2012.

- Definition

Discloses the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain or loss on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss. This element may be used as a single block of text to include the entire intangible asset disclosure including data and tables.

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