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9. Goodwill

Duke Energy evaluates the impairment of goodwill under the guidance of SFAS No. 142. As a result of the annual impairment tests required by SFAS No. 142, Duke Energy recorded a $254 million goodwill impairment charge in the third quarter 2003 to write off all DENA goodwill, most of which related to DENA's trading and marketing business. This impairment charge reflects the reduction in scope and scale of DETM's business and the continued deterioration of market conditions affecting DENA during 2003. Duke Energy used a discounted cash flow analysis to determine fair value. Key assumptions in the analysis included the use of an appropriate discount rate, estimated future cash flows and an estimated run rate of general and administrative costs. In estimating cash flows, Duke Energy incorporated current market information, historical factors and fundamental analysis, and other factors into its forecasted commodity prices. This charge is recorded in the Consolidated Statements of Operations as Impairment of Goodwill.

In 2002, Duke Energy recorded a goodwill impairment charge of $194 million related to International Energy's European trading and marketing business, a portion of which was sold in the fourth quarter of 2003. Significant changes in the European market and operating results adversely affected Duke Energy's outlook for this reporting unit. The exit of key market participants and a tightening of credit requirements were the primary drivers of this revised outlook. The fair value of the European reporting unit was estimated using a discounted cash flow analysis, which included key assumptions including the use of an appropriate discount rate, estimated future cash flows and an estimated run rate of general and administrative costs. In estimating cash flows, Duke Energy incorporated current market information, historical factors and fundamental analysis, and other factors in determining estimated future cash flows. This charge is recorded in the Consolidated Statements of Operations in Discontinued Operations—Net Operating Loss, net of tax. See Note 12 for further information regarding the European reporting unit and its treatment as discontinued operations in the Consolidated Statements of Operations.

Changes in the Carrying Amount of Goodwill

	Balance December 31, 2002			Acquired Goodwill			Impairments			Dispositions(c)			Other(a)			Balance December 31, 2003
	(in millions)
Natural Gas    Transmission	$	2,760		$	—		$	—		$	(27)		$	491		$	3,224
Field Services		481			—			—			—			12			493
Duke Energy    North America		100			—			(100)			—			—			—
International Energy		246			—			—			(5)			(3)			238
Other Operations		6			—			—			—			1			7
Other(b)		154			—			(154)			—			—			—
Total consolidated	$	3,747		$	—		$	(254)		$	(32)		$	501		$	3,962
	Balance December 31, 2001			Acquired Goodwill			Impairments			Dispositions			Other(a)			Balance December 31, 2002
Natural Gas    Transmission	$	481		$	2,279		$	—		$	—		$	—		$	2,760
Field Services		571			—			—			—			(90)			481
Duke Energy    North America		91			—			—			—			9			100
International Energy		427			18			(194)			—			(5)			246
Other Operations		6			—			—			—			—			6
Other(b)		154			—			—			—			—			154
Total consolidated	$	1,730		$	2,297		$	(194)		$	—		$	(86)		$	3,747

(a)   Amounts consist primarily of foreign currency translation and purchase price adjustments to prior year acquisitions.

(b)   Amount represents corporate goodwill that is allocated to DENA for the purpose of impairment testing pursuant to SFAS No. 142. As a result, the impairment charge in 2003 was recorded in the DENA segment.

(c)   Amounts were included in the disposal of a portion of a reporting unit within Natural Gas Transmission and International Energy.

The following table shows what earnings available for common stockholders and earnings per share would have been if amortization (including any related tax effects) related to goodwill that is no longer being amortized (effective January 1, 2002) had been excluded from the year ended December 31, 2001.

Goodwill—Adoption of SFAS No. 142

	For the year ended December 31, 2001
	(in millions, except per share amounts)
Earnings available for common stockholders
Reported earnings available for common stockholders		$	1,884
Add back: Goodwill amortization, net of tax			75
Adjusted earnings available for common stockholders		$	1,959
Basic earnings per share
Reported earnings per share		$	2.45
Goodwill amortization			0.10
Adjusted earnings per share		$	2.55
Diluted earnings per share
Reported earnings per share		$	2.44
Goodwill amortization			0.10
Adjusted earnings per share		$	2.54