Note 10. Goodwill


								Effects of
	September 30,							Currency			September 30,
	2010		Additions		Adjustments			Translation			2011

Aerospace	$	356,680	$	—	$	(103	)	$	(52	)	$	356,525
Energy		81,914		24,188		—			(345	)		105,757


Consolidated	$	438,594	$	24,188	$	(103	)	$	(397	)	$	462,282


								Effects of
	September 30,							Currency			September 30,
	2009		Additions		Adjustments			Translation			2010

Aerospace	$	359,534	$	—	$	(2,722	)	$	(132	)	$	356,680
Energy		83,268		—		—			(1,354	)		81,914


Consolidated	$	442,802	$	—	$	(2,722	)	$	(1,486	)	$	438,594

The above table reflects the segment realignment that occurred during September 2011 for which the above goodwill balances have been retrospectively reclassified to reflect the new reportable segments. See Note 21, Segment information for a discussion of the segment realignment that took place in September 2011. The Company has no historical goodwill impairment losses in periods prior to those presented in the above table.

During the third quarter of fiscal year 2011, Woodward completed the IDS Acquisition (Note 4, Business acquisitions and dispositions), which resulted in the recognition of $24,188 in goodwill. The operations of the IDS Acquisition are being integrated into Woodward's Energy reportable segment.

During the first quarter of fiscal year 2011, Woodward negotiated a lease settlement that was favorable in comparison to the previously recorded restructuring accrual established in purchase accounting in connection with the fiscal year 2009 acquisition of MPC. The resulting benefit of $103 was recorded as a reduction to goodwill.

Adjustments recorded in fiscal year 2010 represent changes in the estimated values of assets acquired and liabilities assumed in purchase accounting, related to the acquisition of HRT (see Note 4, Business acquisitions and dispositions).

Woodward tests goodwill for impairment at the reporting unit level on an annual basis and more often if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The impairment tests consist of comparing the implied fair value of each identified reporting unit with its carrying amount including goodwill. If the carrying amount of the reporting unit exceeds its implied fair value, Woodward compares the implied fair value of goodwill with the recorded carrying amount of goodwill. If the carrying amount of goodwill exceeds the implied fair value of goodwill, an impairment loss would be recognized to reduce the carrying amount to its implied fair value. There was no impairment charge recorded in fiscal years 2011, 2010, or 2009.

In the fourth quarter of fiscal year 2011, Woodward changed its goodwill testing date for all of its reporting units from March 31 to July 31. The change in the goodwill impairment test date is preferable as it better aligns the impairment testing procedures with the completion of the annual financial and strategic planning process. As a result, during fiscal year 2011, Woodward tested its goodwill for impairment as of March 31, 2011 and July 31, 2011 and concluded that there was no impairment of the carrying value of the goodwill. This change in accounting principle did not accelerate, delay, avoid, or cause a goodwill impairment charge. Due to significant judgments and estimates that are utilized in a goodwill impairment analysis, Woodward determined it was impracticable to objectively determine projected cash flows and related valuation estimates as of each July 31 for periods prior to July 31, 2011. As such, Woodward has prospectively applied the change in the annual goodwill impairment testing date from July 31, 2011.

As of March 31 and July 31, 2011, Woodward determined its Turbine Systems, Airframe Systems and Engine Systems operating segments represented individual reporting units. Woodward determined its Electrical Power Systems operating segment included three components that represented reporting units as of March 31, 2011 and four components that represented reporting units as of July 31, 2011 due to the acquisition of IDS.

The fair value of each of Woodward's reporting units was determined using a discounted cash flow method. This method represents a Level 3 input and incorporates various estimates and assumptions, the most significant being projected revenue growth rates, operating earnings margins, and forecasted cash flows based on the discount rate and terminal growth rate. Management projects revenue growth rates, operating earnings margins and cash flows based on each reporting unit's current operational results, expected performance and operational strategies over a five or ten-year period. These projections are adjusted to reflect current economic conditions and the demand for certain products and require considerable management judgment.

Forecasted cash flows used in the July 31, 2011 impairment test were discounted using weighted average cost of capital assumptions from 10.0% to 10.2%. The terminal values of the forecasted cash flows were calculated using the Gordon Growth Model and assumed an annual compound growth rate after five or ten years of 4.3%. Forecasted cash flows used in the March 31, 2011 impairment test were discounted using weighted average cost of capital assumptions of 11.3% and an annual compound growth rate after five years of 4.4%. These inputs, which are unobservable in the market, represent management's best estimate of what market participants would use in determining the present value of the Company's forecasted cash flows. Changes in these estimates and assumptions can have a significant impact on the fair value of forecasted cash flows. Woodward evaluated the reasonableness of the reporting units resulting fair values utilizing a market multiple method.

The results of Woodward's goodwill impairment tests performed as of July 31, 2011 indicated the estimated fair value of each reporting unit was substantially in excess of its carrying value, and accordingly, no impairment existed.

As part of the Company's ongoing monitoring efforts, Woodward will continue to consider the global economic environment and its potential impact on Woodward's business in assessing goodwill recoverability. There can be no assurance that Woodward's estimates and assumptions regarding forecasted cash flows of certain reporting units, the period or strength of the current economic recovery, or the other inputs used in forecasting the present value of forecasted cash flows will prove to be accurate projections of future performance.