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Goodwill | 6 Months Ended
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Jun. 30, 2011
Goodwill |
Goodwill |
2. | Goodwill
Goodwill, which represents the cost of acquired companies in excess of the fair value of the net assets at the acquisition date, has been recorded in connection with various acquisitions and is subject to annual impairment testing in the fourth quarter of each year or when events or changes in circumstances indicate the carrying amount may not be recoverable. Recorded goodwill has been allocated to the Company's reporting units based on the relative fair value of each acquired reporting unit. Management evaluates the recoverability of goodwill by comparing the carrying value of the Company's reporting units to their fair value. Fair value is determined using discounted cash flows, supplemented by market-based assessments of fair value. Impairment is measured as the difference between the resulting implied fair value of goodwill and its recorded carrying value. The determination of fair value is significantly impacted by estimates for each of the Company's markets related to current valuations, current and future economic conditions, and the Company's strategic plans. Due to uncertainties in the estimation process and significant volatility in demand for new housing, actual results could differ significantly from such estimates. The Company recorded $1.5 billion of goodwill in connection with the merger with Centex Corporation ("Centex"), which was completed in August 2009. All goodwill associated with prior transactions has been previously written-off. Since the Centex merger, the Company has recorded impairments of the majority of the associated goodwill, most recently in the third quarter of 2010. These impairments have resulted from a variety of factors, including, among other things, deteriorations in market conditions, the Company's operating results falling below previously forecasted levels, and a sustained decline in the Company's market capitalization since the Centex merger. If management's expectations of future results and cash flows for any of its reporting units decrease, goodwill may be further impaired. Also, while not directly triggering an impairment of goodwill, a significant decrease in the Company's market capitalization in the future may indicate that the fair value of one or more of the Company's reporting units has decreased, which may result in an impairment of goodwill. Of the Company's remaining goodwill of $240.5 million at June 30, 2011, $228.0 million relates to reporting units that are at increased risk of future impairment. Management will continue to monitor these reporting units and perform goodwill impairment testing when events or changes in circumstances indicate the carrying amount may not be recoverable.

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