Page 91 - New8814 GP 2011_AR-fnl

Basic HTML Version

F-11
F-11
Goodwill
Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business
combination that are not individually identified and separately recognized. The Company has recorded goodwill for business
combinations to the extent the purchase price exceeded the fair value of the net identifiable tangible and intangible assets of
each acquired company. The Company’s goodwill currently is comprised of amounts relating to its acquisitions of Green
Plains Ord, Green Plains Central City, Green Plains Holdings II (Global), Green Plains Otter Tail and BlendStar.
Goodwill is reviewed for impairment at least annually. The goodwill impairment test is a two-step test. Under the first
step, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the
reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the entity
must perform step two of the impairment test. Under the second step, an impairment loss is recognized for any excess of the
carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of
goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and
the residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting
unit is determined using a discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying value, no
further analysis is necessary.
The Company performs its annual impairment review of goodwill at October 1, and when a triggering event occurs
between annual impairment tests. No impairment losses were recorded for the periods reported.
Financing Costs
Fees and costs related to securing debt financing are recorded as financing costs. Debt issuance costs are stated at cost
and are amortized utilizing the effective interest method for term loans and on a straight-line basis for revolving credit
arrangements over the life of the agreements. However, during periods of construction, amortization of such costs is
capitalized in construction-in-progress.
Noncontrolling Interests
Noncontrolling interests represent the minority partners’ shares of the equity and income of a majority-owned and
consolidated subsidiary of Green Plains Grain at December 31, 2011; and in prior periods also included the minority
partners’ share of the equity and income of BlendStar. The Company acquired all remaining noncontrolling interests in
BlendStar in 2011. Noncontrolling interests are classified on the consolidated statements of operations as a part of net income
and the accumulated amount of noncontrolling interests are classified on the consolidated balance sheets as a part of
stockholders’ equity.
Selling, General and Administrative Expenses
Selling, general and administrative expenses are primarily general and administrative expenses for employee salaries,
incentives and benefits; office expenses; director compensation; and professional fees for accounting, legal, consulting, and
investor relations activities; as well as non-plant depreciation and amortization costs.
Environmental Expenditures
Environmental expenditures that pertain to current operations and relate to future revenue are expensed or capitalized
consistent with its capitalization policy. Probable liabilities incurred that are reasonably estimable are also expensed or
capitalized according to this policy and if material, would be disclosed in the Company’s quarterly and annual filings.
Expenditures that result from the remediation of an existing condition caused by past operations and that do not contribute to
future revenue are expensed as incurred.
Stock-Based Compensation
The Company recognizes compensation cost using a fair value based method whereby compensation cost is measured at
the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period.
The Company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued to both
employees and non-employees. Stock issued for compensation is valued using the market price of the stock on the date of the
related agreement.