Goodwill and Other Intangible Assets

9 Months Ended

Aug. 31, 2011

Goodwill and Other Intangible Assets [Abstract]

Note 10. Goodwill and Other Intangible Assets

Goodwill

The following table is a summary of the changes to goodwill for the nine months ended August 31, 2011 (in thousands):


	Nine Months
	Ended
	August 31, 2011
Balance, at beginning of period	$	364,964
Add: Contingent consideration		825
Add: Translation adjustments		1,034

Balance, at end of period	$	366,823

Contingent consideration recorded during the nine months ended August 31, 2011 relates to the lapse of certain conditions as specified in the purchase agreements associated with the acquisition of LongAcre Partners in 2007. During the three months ended August 31, 2011, a payment of $754,000 for contingent consideration was made to the selling owners of LongAcre Partners, which was accrued to goodwill in previous periods.

At least annually, and more frequently if warranted, we assess whether goodwill has been impaired by comparing the estimated fair value of each reporting unit with its estimated net book value. Periodically estimating the fair value of a reporting unit requires significant judgment and often involves the use of significant estimates and assumptions. These estimates and assumptions could have a significant effect on whether or not an impairment charge is recorded and the magnitude of such a charge. We completed our annual test of goodwill impairment as of June 1, 2011. No impairment was identified.

All goodwill is assigned to our Capital Markets segment and is expected to be deductible for tax purposes.

Intangible Assets

The following table presents the gross carrying amount, accumulated depreciation and net carrying amount of identifiable intangible assets and weighted average amortization period as of August 31, 2011 and November 30, 2010 (in thousands):


	August 31, 2011
								Weighted
								average
			Accumulated			Net carrying		remaining
	Gross cost		amortization			amount		lives (years)
Exchange and clearing organization membership interests and registrations	$	11,219	$	—		$	11,219		N/A
Customer relationships		10,542		(2,425	)		8,117		6.8
Trade name		1,300		(144	)		1,156		1.3
Other		100		(7	)		93		14.0

	$	23,161	$	(2,576	)	$	20,585


	November 30, 2010
								Weighted
								average
			Accumulated			Net carrying		remaining
	Gross cost		amortization			amount		lives (years)
Customer relationships	$	4,742	$	(1,726	)	$	3,016		4.2
Other		100		(2	)		98		14.8

	$	4,842	$	(1,728	)	$	3,114

The aggregate amortization expense for the three months and nine months ended August 31, 2011 was $0.4 million and $0.8 million, respectively, and for the three and eight months ended August 31, 2010 was $0.2 million and $0.5 million, respectively. Amortization expense is included in Other expenses on the Consolidated Statements of Earnings.

The estimated future amortization expense for fiscal years ended November 30, 2011 through 2016 are as follows (in thousands):


	Estimated future
	amortization
Fiscal Year	expense
2011 (Period from September to November)	$	570
2012		2,203
2013		1,243
2014		853
2015		695
2016		695

Mortgage Servicing Rights

We hold servicing rights to certain military housing mortgage loans, which are accounted for as an intangible asset and included within Other assets in the Consolidated Statements of Financial Condition. The mortgage servicing rights are amortized over the period of the estimated net servicing income, which is reported in Other income in the Consolidated Statements of Earnings. We provide no credit support in connection with the servicing of these loans and are not required to make servicing advances on the loans in the underlying portfolio. We determined that the servicing rights represent one class of servicing rights based on the availability of market inputs to measure the fair value of the asset and our treatment of the asset as one aggregate pool for risk management purposes. We earned fees related to these servicing rights of $1.0 million and $2.9 million during the three and nine months ended August 31, 2011, respectively, and $0.9 million and $2.6 million during the three and eight months ended August 31, 2010, respectively.

The following presents the activity in the balance of these servicing rights for the nine months ended August 31, 2011 and eleven months ended November 30, 2010 (in thousands):


	Nine Months			Eleven Months
	Ended			Ended
	August 31, 2011			November 30, 2010
Balance, beginning of period	$	8,263		$	8,500
Add: Acquisition		347			87
Less: Amortization		(278	)		(324	)

Balance, end of period	$	8,332		$	8,263

We estimate the fair value of these servicing rights was $15.8 million and $16.1 million at August 31, 2011 and November 30, 2010, respectively. Mortgage servicing rights do not trade in an active, open market with readily observable prices. Accordingly, the fair value of servicing rights is estimated using a discounted cash flow model, which projects future cash flows discounted at a risk-adjusted rate based on recently observed transactions for interest-only bonds backed by military housing mortgages. Estimated future cash flows consider contracted servicing fees and costs to service. Given the underlying asset class, assumptions regarding repayment and delinquencies are not significant to the fair value.

- Definition

The entire disclosure for 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 (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.

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