from by-products created from the processing and not used in pro- ducing company products. The company has developed a series of ratios using historical data and current market conditions (which themselves involve estimates and judgment determinations by the company) to allocate the meat cost pool to each meat component. In addition, substantially all inventoriable expenses, meat, packag- ing, and supplies are valued by the last-in, first-out method. Goodwill and other intangibles: The company’s identifiable intangible assets are amortized over their useful life, unless the useful life is determined to be indefinite. The useful life of an iden- tifiable intangible asset is based on an analysis of several factors including: contractual, regulatory, or legal obligations; demand; competition; and industry trends. Goodwill and indefinite-lived intangible assets are not amortized, but are tested at least annually for impairment. The goodwill impairment test is a two-step process. First, the fair value of each reporting unit is compared with the carrying amount of the reporting unit, including goodwill. The estimated fair value of the reporting unit is determined on the basis of discounted cash flow. If the carrying value exceeds the fair value of the reporting unit, then a second step must be completed in order to determine the amount of goodwill impairment that should be recorded. In the second step, the implied fair value of the reporting unit’s goodwill is determined by allocating the reporting unit’s fair value to all of  its assets and liabilities, other than goodwill, in a manner similar to  a purchase price allocation. The implied fair value of the goodwill resulting from the application of this second step is then compared to the carrying amount of the goodwill and an impairment charge is recorded for the difference. Annual impairment testing for indefi- nite-lived intangible assets compares the fair value and carrying value of the intangible. The fair value of indefinite-lived intangible assets is determined on the basis of discounted cash flows. If the carry- ing value exceeds the fair value, the indefinite-lived intangible asset is considered impaired and an impairment charge is recorded for the difference. Intangible assets that are subject to amortization are evaluated for impairment using a process similar to that used to evaluate elements of long-lived assets. The assumptions used in the estimate of fair value are consistent with historical performance and the estimates and assumptions used in determining future profit plans for each reporting unit.  The company reviews product growth patterns, market share  information, industry trends, changes in distribution channels, and economic indicators in determining the estimates and assumptions used to develop cash flow and profit plan assumptions. Accrued promotional expenses: Accrued promotional expenses are unpaid liabilities for customer promotional programs in process or completed as of the end of the fiscal year. There are two com- ponents to these liabilities: promotional contractual accruals and voluntary performance accruals. Promotional contractual accruals are based on agreements with customers for defined performance. The liability relating to these agreements is based on a review of the outstanding contracts on which performance has taken place, but for which the promotional payments relating to such contracts remain unpaid as of the end of the fiscal year. Voluntary perform- ance accruals are funded through customer purchases and are based on historical promotional expenditure rates by product line. Significant estimates used to determine these liabilities include  the level of customer performance and the historical promotional expenditure rate versus contracted rates. Employee benefit plans: The company incurs expenses relating to employee benefits such as noncontributory defined benefit pen- sion plans and postretirement health care benefits. In accounting for these employment costs, management must make a variety  of assumptions and estimates including mortality rates, discount rates, overall company compensation increases, expected return on plan assets, and health care cost trend rates. The company considers historical data, as well as current facts and circumstances, when determining these estimates. The company uses third-party specialists to assist management in the determination of these estimates and the calculation of certain employee benefit expenses. The company is a processor of branded and unbranded food products for the retail, foodservice, and fresh customer markets. The company operates in the following five segments: 2004 Annual Report 17 Segment Business Conducted Grocery Products This segment consists primarily of the processing, marketing, and sale of shelf- stable food products sold predominantly  in the retail market. Refrigerated This segment includes the Meat Products Foods  and Foodservice business units. This segment consists primarily of the processing, market- ing, and sale of branded and unbranded pork products for the retail, foodservice, and fresh customer markets. This segment also includes the company’s 50 percent interest in the Precept Foods joint venture, which offers fresh, case-ready, branded pork and beef products to its retail customers. Jennie-O  This segment consists primarily of the  Turkey Store  processing, marketing, and sale of branded and unbranded turkey products for the retail, foodservice, and fresh customer markets. Results of Operations Overview