Goodwill

Effective at the beginning of fiscal year 2014, the Company began operating under its new reportable segments: GBS, GIS and NPS (see Note 21). The following tables summarize the changes in the carrying amount of goodwill, by segment, for the years ended March 28, 2014 and March 29, 2013, respectively, applying the segment changes retroactively to the beginning of fiscal year 2012.



(Amounts in millions)	GBS			GIS			NPS			Total
	(As Restated)			(As Restated)						(As Restated)
Goodwill, gross	$	1,346		$	2,139		$	793		$	4,278
Accumulated impairment losses	(701		)	(2,061		)	—			(2,762		)
Balance as of March 29, 2013, net	645			78			793			1,516

Additions	55			120			36			211
Deductions	(12		)	—			(41		)	(53		)
Foreign currency translation	(8		)	1			—			(7		)
Other reclassifications	—			—			—			—

Goodwill, gross	1,381			2,260			788			4,429
Accumulated impairment losses	(701		)	(2,061		)	—			(2,762		)
Balance as of March 28, 2014, net	$	680		$	199		$	788		$	1,667



(Amounts in millions)	GBS			GIS			NPS		Total
	(As Restated)			(As Restated)					(As Restated)
Goodwill, gross	$	1,607		$	2,139		$	768	$	4,514
Accumulated impairment losses	(701		)	(2,061		)	—		$	(2,762	)
Balance as of March 30, 2012, net	906			78			768		1,752

Additions	—			—			25		25
Deductions	(241		)	—			—		(241		)
Foreign currency translation	(20		)	—			—		(20		)

Goodwill, gross	1,346			2,139			793		4,278
Accumulated impairment losses	(701		)	(2,061		)	—		(2,762		)
Balance as of March 29, 2013, net	$	645		$	78		$	793	$	1,516

Concurrent with the change in its reportable segments, the Company reassigned goodwill among certain of its reporting units based on their relative fair values. As a result of this reassignment, $47 million of goodwill was allocated from the former MSS segment to the new GBS segment. The reassignment of goodwill is reflected in the goodwill balances as of March 29, 2013.

The fiscal 2014 additions to goodwill of $211 million are due to the third quarter acquisition of ServiceMesh, which resulted in allocation of goodwill to all three reportable segments, and the second quarter GBS acquisition of InfoChimps (see Note 5). The reductions in goodwill are due to the first quarter divestiture of GBS' flood insurance BPO business and the second quarter divestiture of NPS' ATD business (see Note 6). No goodwill was allocated to the GBS software business that was classified as discontinued operations in the second quarter (see Note 6). The foreign currency translation amount reflects the impact of currency movements on non-U.S. dollar-denominated goodwill balances.

The fiscal 2013 addition of $25 million relates to an acquisition in the NPS segment (see Note 5). The reduction of $241 million relates to the divestiture of a business within the GBS segment (see Note 6).

Goodwill Impairment Analyses

As described in Note 1, the Company tests goodwill for impairment on an annual basis, as of the first day of the second fiscal quarter, and between annual tests 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. Following is a description of the goodwill impairment analyses for each of the fiscal years.

Fiscal 2014

As of the beginning of the first quarter of fiscal 2014, the Company performed the first step of the goodwill impairment test for all reporting units due to the segment changes described above. Based on the results of the first step of the impairment test, the Company concluded that the fair value of each reporting unit significantly exceeded its carrying value and therefore the second step of the goodwill impairment test was not required.

Due to the disposal of the flood insurance BPO business later in the first quarter (see Note 6), the Company performed an interim assessment to determine whether the remaining goodwill of the GBS-IS&S reporting unit, which contained the divested business, might be impaired. The Company determined that no impairment existed.

In connection with the fiscal 2014 annual impairment assessment, the Company performed a qualitative assessment for each reporting unit (Step 0). Based on these qualitative assessments, the Company determined that none of its reporting units met the "more-likely-than-not" threshold that would require the Company to perform the first step of the two-step goodwill impairment test. Accordingly, the Company did not perform any further analysis.

In addition, in connection with the disposal of ATD during the second quarter (see Note 6), the Company performed the first step of the goodwill impairment test for the remaining business of the NPS reporting unit as of the date of the disposal. The fair value of the remaining NPS reporting unit significantly exceeded its carrying value, and the second step of the goodwill impairment test was not required.

At the end of fiscal year 2014, the Company assessed whether there were events or changes in circumstances that would more likely than not reduce the fair value of any of its reporting units below their carrying amounts and require an interim goodwill impairment test. The Company determined that there have been no events or changes in circumstances that would more likely than not reduce the fair value of any of its reporting units below their carrying amounts, and, as a result, it was unnecessary to perform an interim impairment test as of March 28, 2014.

Any adverse changes in the business climate or in CSC's operating results could cause to perform additional impairment analyses of goodwill prior to the next annual test, which may result in impairment charges.

Fiscal 2013

In connection with the fiscal 2013 annual impairment assessment, the Company chose to bypass the initial qualitative assessment and proceeded directly to the first step of the impairment test for all reporting units, and concluded that no impairment had occurred. The fair values of all of CSC's reporting units were significantly in excess of their carrying values.

Due to the divestiture of CSC's credit services business in the third quarter of fiscal 2013, which caused the allocation of $241 million of goodwill from the GBS-IS&S reporting unit to that disposed business, the Company assessed the remaining goodwill related to GBS-IS&S for potential impairment. The Company performed the first step of the two-step goodwill impairment test and concluded that the remaining goodwill related to GBS-IS&S, after allocation of goodwill to the divested business, was not impaired.

At the end of fiscal year 2013, the Company assessed whether there were events or changes in circumstances that would more likely than not reduce the fair value of any of its reporting units below their carrying amounts. There were no such indicators for any of the reporting units, and as a result, it was unnecessary to perform an interim impairment test.

Fiscal 2012

During the fiscal 2012 annual goodwill impairment assessment, the Company concluded that fair value was below carrying value for its GBS IS&S reporting unit. Management believed that the decline in the estimated fair values of this reporting unit during the second quarter was a result of lower-than-forecast operating performance. Therefore, the Company conducted step two of the goodwill impairment test for the GBS-IS&S reporting unit, discussed below.

The lower reporting unit fair value calculated in step one and unrecognized fair value changes to the carrying values of other assets resulted in an implied fair value of goodwill below the carrying value of goodwill for the GBS-IS&S reporting unit. At the end of the second quarter of fiscal 2012, the Company had not completed the impairment test and therefore recorded its best estimate of the goodwill impairment charge of $158 million related to the GBS-IS&S reporting unit.

The Company completed all analyses related to its annual goodwill impairment test during the third quarter and reduced the impairment loss related to the GBS-IS&S reporting unit recorded in the second quarter by $3 million. The adjustment resulted from finalizing tax estimates and the fair values of customer-related and technology intangible assets. Thus, the net goodwill impairment loss recorded in fiscal 2012 was $155 million, with a $3 million reduction in the impairment loss recorded in the third quarter.

At the end of the second quarter of fiscal 2012, the Company determined that sufficient indicators existed to require performance of an additional interim goodwill impairment analysis as of September 30, 2011. These indicators included: a further significant and sustained decline in CSC’s stock price which resulted in a market capitalization, adjusted for control premium, decreasing to an amount less than book value and remaining there for some time; further decreases in the performance metric multiples of comparable public companies, driving the market approach valuations lower; and additional evidence of certain reporting units’ performance which fell short of forecasts used in the annual market-based and income-based tests. No reporting units failed step one of the interim goodwill impairment two-step test.

At the end of the third quarter of fiscal 2013, CSC determined that the GBS-IS&S reporting unit had several indicators, including, the loss of a significant customer, failure to win major bids for new business, and reduction in forecasted earnings to trigger an interim impairment test. There were no triggering events for the other reporting units with goodwill.

The Company performed the first step of the two-step test and concluded that GBS-IS&S's weighted average fair value was lower that its carrying value. The ensuing step two portion of the goodwill impairment analysis resulted in the Company recording an additional goodwill impairment charge of $77 million, due to the impact of the fair value of tangible assets and the unrecognized intangible assets, primarily customer relationship and technology assets.

The Company tested its long-lived assets for impairment in conjunction with the fiscal 2012 annual and the fiscal 2012 second and third quarter interim goodwill impairment tests and concluded that these assets were not impaired.

At the end of the fourth quarter of 2012, the Company assessed whether there were events or change in circumstances that would more likely than not reduce the fair value of any of its reporting units below their carrying amounts. There were no such indicators for any of the reporting units with goodwill, and therefore, an interim goodwill test was not required.