PDF Version
PDF Version PDF Version
Indefinite-lived intangible assets are tested for impairment annually and when events or changes incircumstances indicate the assets might be impaired. Impairment is indicated when the carrying value of theintangible asset exceeds its fair value.In estimating the fair value of the reporting unit and indefinite-lived intangible assets, we use valuationtechniques based on an income approach where future cash flows are discounted. Our future cash flowestimates include assumptions about revenue and assets under management growth rates, pre-tax profitmargin, the average effective fee rate, the effective tax rate, and the discount rate, which is based on ourweighted average cost of capital. The most relevant of these assumptions to the determination of estimatedfair value are the assets under management growth rate and the discount rate.We performed our annual impairment tests for goodwill and indefinite-lived intangible assets as ofAugust 1, 2009. We estimated the discounted future cash flows using a 6.0% compounded annual growthrate of assets under management and a discount rate of 13.4%. The fair value of the investment managementand related services reporting unit exceeded its carrying value by more than 100%. The fair values of ourindefinite-lived intangible assets exceeded their respective carrying values by more than 100%.The assumptions used in our annual impairment tests for goodwill and indefinite-lived intangible assetswere developed taking into account the ongoing market conditions with an expectation that the recovery inthe level of assets under management may take longer than has been historically experienced in yearsfollowing a severe market downturn. Therefore, the growth rate assumption used as of August 1, 2009 waslower than the historical compounded growth rates. We did not recognize any impairment because ourestimates of the fair values of our reporting unit and our indefinite-lived assets exceeded their respectivecarrying values. A hypothetical 500 basis point decline in the assets under management growth rate or a 500basis point increase in the discount rate would not cause either the investment management and relatedservices reporting unit or the management contracts to fail step one of the impairment tests for goodwill orindefinite-lived intangible assets.We subsequently monitor the market conditions and their potential impact on the assumptions used inthe annual calculations of fair value to determine whether circumstances have changed that would morelikely than not reduce the fair value of our reporting unit below its carrying value, or indicate that ourindefinite-lived intangible assets might be impaired. We consider, among other things, changes in our assetsunder management and pre-tax profit margin amounts, which affect our revenue growth rate assumptions,by assessing whether these changes would impact the reasonableness of the assumptions used in ourimpairment test as of August 1, 2009. We also monitor fluctuations of our common stock per share price toevaluate our market capitalization relative to the reporting unit as a whole. Subsequent to August 1, 2009,there were no impairments to goodwill or indefinite-lived intangible assets as we determined no eventsoccurred or circumstances changed that would more likely than not reduce the fair value of the reportingunit below its carrying value, or indicate that our indefinite-lived intangible assets might be impaired.We test definite-lived intangible assets for impairment quarterly. Impairment is indicated when thecarrying value of the asset is not recoverable and exceeds its fair value. In evaluating the recoverability ofdefinite-lived intangible assets, we estimate the undiscounted future cash flows to be derived from theseassets. Our future undiscounted cash flow projections include assumptions about revenue and assets undermanagement growth rates, effective fee rates, investor redemptions, pre-tax profit margin, and expecteduseful lives. The most relevant of these assumptions to determine future cash flows is the change in theamount of assets under management. The assumptions used in our impairment tests are developed takinginto consideration the ongoing market conditions. If the carrying value of the asset is not recoverablethrough the related undiscounted cash flows, we measure the impairment loss based on the amount bywhich the carrying value of the asset exceeds its fair value. Fair value of the asset is determined bydiscounted cash flows or other methods as appropriate for the asset type.56
As of September 30, 2009, approximately 58% of our definite-lived intangible assets related toinvestment management contracts of Fiduciary Trust Company International (“FTCI”) high net-worthaccounts. We estimated the future undiscounted cash flows for the contracts using assets under managementgrowth rates ranging from 0.3% to 0.5% and the future discounted cash flows using a discount rate of13.9%. We did not recognize an impairment loss because the fair value of the contracts exceeded theircarrying value. As of September 30, 2009, a decline in our assets under management of approximately 40%could cause our FTCI high net-worth management contracts to be impaired.The undiscounted future cash flow projections for the remaining 42% of our definite-lived intangibleassets exceeded their respective carrying values by more than 30%. We estimated the undiscounted futurecash flows using assets under management growth rates ranging from (6.2)% to 6.0%, depending on thetype of management contracts. As of September 30, 2009, a decline in our assets under management ofapproximately 40% could cause us to evaluate whether the fair value of our other definite-lived intangibleassets is below the asset carrying value.While we believe that our impairment tests and the assumptions used to estimate fair value arereasonable and appropriate, if the assumptions used in our estimates of fair value change in the future, wemay be required to record impairment charges or otherwise accelerate amortization expense.RevenuesWe recognize investment management fees, shareholder servicing fees and distribution fees as earnedover the period in which services are rendered, except for performance-based investment management fees,which are recognized when earned. We recognize underwriting commissions related to the sale of shares ofour sponsored investment products on the trade date. Investment management fees are generally determinedbased on a percentage of assets under management, except for performance-based investment managementfees, which are based on performance targets established in the related investment management contracts.Generally, shareholder servicing fees are calculated based on the number and type of accounts serviced,while distribution fees are generally based on a percentage of assets under management.Assets under management is calculated for our sponsored investment products using fair valuemethods derived primarily from unadjusted quoted market prices, unadjusted independent third-party brokeror dealer price quotes in active markets, or adjusted market prices or price quotes. The fair values ofsecurities for which market prices are not readily available are internally valued using variousmethodologies as appropriate for each security type. Securities for which market prices are not readilyavailable generally represent a de minimus amount of our total assets under management. The pricing of thesecurities held by our sponsored investment products is governed by a global valuation and pricing policy,which defines valuation and pricing conventions for each security type, including practices for respondingto unexpected or unusual market events. While recent economic conditions and financial market declineshave increased market price volatility, the fair value of the majority of the securities held by the sponsoredinvestment products continues to be derived from readily available market price quotations.Income TaxesWe record deferred tax assets and liabilities for temporary differences between the tax basis of assetsand liabilities, and the reported amounts in the consolidated financial statements using the statutory tax ratesin effect for the year when the reported amount of the asset or liability is recovered or settled, respectively.The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results ofoperations in the period that includes the enactment date. A valuation allowance is recorded to reduce thecarrying values of deferred tax assets to the amount that is more likely than not to be realized. For each taxposition taken or expected to be taken in a tax return, we determine whether it is more likely than not that57
- Page 16 and 17: A. Assets Under Management (“AUM
- Page 18 and 19: 60 days. If agreements representing
- Page 20 and 21: Similar arrangements exist with the
- Page 22 and 23: We generally operate our institutio
- Page 24 and 25: Franklin Templeton Variable Insuran
- Page 26 and 27: CATEGORY(and approximate amount of
- Page 28 and 29: The following table sets forth the
- Page 30 and 31: Korea; the Commission de Surveillan
- Page 32 and 33: COMPETITIONThe financial services i
- Page 34 and 35: or other efforts successfully stabi
- Page 36 and 37: and, consequently, we are incurring
- Page 38 and 39: such as information, systems and te
- Page 40 and 41: like our business, is based in part
- Page 42 and 43: orrowing costs and limit our access
- Page 44 and 45: director of various subsidiaries of
- Page 46 and 47: PART IIItem 5. Market for Registran
- Page 48 and 49: OverviewWe are a global investment
- Page 50 and 51: Net income decreased in fiscal year
- Page 52 and 53: Investment Management Fee RateThe f
- Page 54 and 55: accounts closed in a calendar year
- Page 56 and 57: Information Systems, Technology and
- Page 58 and 59: Our investments in sponsored invest
- Page 60 and 61: At September 30, 2009, we had $355.
- Page 62 and 63: Off-Balance Sheet ArrangementsAs of
- Page 64 and 65: The fair value of retained subordin
- Page 68 and 69: the position will be sustained upon
- Page 70 and 71: Selected Quarterly Financial Data (
- Page 72 and 73: The following is a summary of the e
- Page 74 and 75: Item 8.Financial Statements and Sup
- Page 76 and 77: REPORT OF INDEPENDENT REGISTERED PU
- Page 78 and 79: CONSOLIDATED BALANCE SHEETS(dollars
- Page 80 and 81: CONSOLIDATED STATEMENTS OF STOCKHOL
- Page 82 and 83: CONSOLIDATED STATEMENTS OF CASH FLO
- Page 84 and 85: Fair Value Measurements. The Compan
- Page 86 and 87: Company held interest-rate swap agr
- Page 88 and 89: not performed. If the carrying valu
- Page 90 and 91: Accumulated Other Comprehensive Inc
- Page 92 and 93: acquisition cost was allocated to t
- Page 94 and 95: FHLB borrowings and amounts availab
- Page 96 and 97: The Company recognized other-than-t
- Page 98 and 99: The changes in Level 3 assets measu
- Page 100 and 101: Changes in the allowance for loan l
- Page 102 and 103: Company sold retained subordinated
- Page 104 and 105: Certain of the goodwill and intangi
- Page 106 and 107: At September 30, 2009, maturities o
- Page 108 and 109: The components of the net deferred
- Page 110 and 111: At September 30, 2009, the banking/
- Page 112 and 113: Total assets under management of in
- Page 114 and 115: Stock OptionsThe following table su
Indefinite-lived intangible assets are tested for impairment annually and when events or changes incircumstances indicate the assets might be impaired. Impairment is indicated when the carrying value of theintangible asset exceeds its fair value.In estimating the fair value of the reporting unit and indefinite-lived intangible assets, we use valuationtechniques based on an income approach where future cash flows are discounted. Our future cash flowestimates include assumptions about revenue and assets under management growth rates, pre-tax profitmargin, the average effective fee rate, the effective tax rate, and the discount rate, which is based on ourweighted average cost of capital. The most relevant of these assumptions to the determination of estimatedfair value are the assets under management growth rate and the discount rate.We performed our annual impairment tests for goodwill and indefinite-lived intangible assets as ofAugust 1, 2009. We estimated the discounted future cash flows using a 6.0% compounded annual growthrate of assets under management and a discount rate of 13.4%. The fair value of the investment managementand related services reporting unit exceeded its carrying value by more than 100%. The fair values of ourindefinite-lived intangible assets exceeded their respective carrying values by more than 100%.The assumptions used in our annual impairment tests for goodwill and indefinite-lived intangible assetswere developed taking into account the ongoing market conditions with an expectation that the recovery inthe level of assets under management may take longer than has been historically experienced in yearsfollowing a severe market downturn. Therefore, the growth rate assumption used as of August 1, 2009 waslower than the historical compounded growth rates. We did not recognize any impairment because ourestimates of the fair values of our reporting unit and our indefinite-lived assets exceeded their respectivecarrying values. A hypothetical 500 basis point decline in the assets under management growth rate or a 500basis point increase in the discount rate would not cause either the investment management and relatedservices reporting unit or the management contracts to fail step one of the impairment tests for goodwill orindefinite-lived intangible assets.We subsequently monitor the market conditions and their potential impact on the assumptions used inthe annual calculations of fair value to determine whether circumstances have changed that would morelikely than not reduce the fair value of our reporting unit below its carrying value, or indicate that ourindefinite-lived intangible assets might be impaired. We consider, among other things, changes in our assetsunder management and pre-tax profit margin amounts, which affect our revenue growth rate assumptions,by assessing whether these changes would impact the reasonableness of the assumptions used in ourimpairment test as of August 1, 2009. We also monitor fluctuations of our common stock per share price toevaluate our market capitalization relative to the reporting unit as a whole. Subsequent to August 1, 2009,there were no impairments to goodwill or indefinite-lived intangible assets as we determined no eventsoccurred or circumstances changed that would more likely than not reduce the fair value of the reportingunit below its carrying value, or indicate that our indefinite-lived intangible assets might be impaired.We test definite-lived intangible assets for impairment quarterly. Impairment is indicated when thecarrying value of the asset is not recoverable and exceeds its fair value. In evaluating the recoverability ofdefinite-lived intangible assets, we estimate the undiscounted future cash flows to be derived from theseassets. Our future undiscounted cash flow projections include assumptions about revenue and assets undermanagement growth rates, effective fee rates, investor redemptions, pre-tax profit margin, and expecteduseful lives. The most relevant of these assumptions to determine future cash flows is the change in theamount of assets under management. The assumptions used in our impairment tests are developed takinginto consideration the ongoing market conditions. If the carrying value of the asset is not recoverablethrough the related undiscounted cash flows, we measure the impairment loss based on the amount bywhich the carrying value of the asset exceeds its fair value. Fair value of the asset is determined bydiscounted cash flows or other methods as appropriate for the asset type.56
Change language