http://amedia.disney.go.com/investorrelations/2007_q3.pdf What are depreciation meethods used?

Question

This is for homework and I am a bit lost on how you can tell. Straight line is the same every year, right? Double declining is doubled every year, right?

Answer 1

Yo! I've taken any accounting classes for at least 15 years. But I think you looking at the wrong stuff.

Parks, Resorts and Other Property

Parks, resorts, and other property are carried at historical cost. Depreciation is computed on the straight-line method over estimated useful lives as follows:




Attractions
25 – 40 years

Buildings and improvements
40 years

Leasehold improvements
Life of lease or asset life if less

Land improvements
20 – 40 years

Furniture, fixtures and equipment
3 – 25 years



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Table of Contents

Goodwill and Other Intangible Assets

The Company performs an annual impairment test at fiscal year end for goodwill and other indefinite-lived intangible assets, including FCC licenses and trademarks. As required by Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS 142), goodwill is allocated to various reporting units, which are generally one level below our operating segments.

To determine if there is potential goodwill impairment, SFAS 142 requires the Company to compare the fair value of the reporting unit to its carrying amount on an annual basis. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the fair value of the goodwill within the reporting unit is less than the carrying value of its goodwill.

To determine the fair value of our reporting units, we generally use a present value technique (discounted cash flow) corroborated by market multiples when available and as appropriate, except for the ABC Television Network, a business within the Media Networks operating segment, for which we used a revenue multiple. We did not use a present value technique or a market multiple approach to value the ABC Television Network as a present value technique would not capture its full fair value and there is little comparable market data available due to the scarcity of television networks. We applied what we believe to be the most appropriate valuation methodology for each of our reporting units. If we had established different reporting units or utilized different valuation methodologies, the impairment test results could differ.

SFAS 142 requires the Company to compare the fair value of an indefinite-lived intangible asset to its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized. Fair values for goodwill and other indefinite-lived intangible assets are determined based on discounted cash flows, market multiples, or appraised values, as appropriate.

We completed our impairment testing as of September 30, 2006, which resulted in a non-cash impairment charge of $32 million related to certain FCC licenses, primarily associated with ESPN Radio stations, reflecting an overall market decline in certain radio markets in which we operate.

Amortizable intangible assets, principally copyrights, are amortized on a straight-line basis over periods ranging from 10 – 31 years.

However, their other assets (Studio Entertainment, Consumer Products, etc.) could be under MACRs
It could not ACRS since the useful life would run out already or has been used straight-line anyhow.


PS. I let you know a secrete. Disney park and resort are losing money. If they use DB, they will be show losses on the book. There will be a decline on Disney price.

Answer 2

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