QUANTA SERVICES INC, QUANTA SERVICES MANAGEMENT ...

QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
these considerations, management utilizes various valuation methods, including an income approach, a market
approach and a cost approach, to determine the fair value of intangible assets acquired based on the
appropriateness of each method in relation to the type of asset being valued. The assumptions used in these
valuation methods are analyzed and compared, where possible, to available market data, such as industry-based
weighted average costs of capital and discount rates, trade name royalty rates, public company valuation
multiples and recent market acquisition multiples. The level of inputs used for these fair value measurements is
the lowest level (Level 3). Quanta believes that these valuation methods appropriately represent the methods that
would be used by other market participants in determining fair value.
Quanta uses fair value measurements on a routine basis in its assessment of assets classified as goodwill,
other intangible assets and long-lived assets held and used. In accordance with its annual impairment test during
the quarter ended December 31, 2011, the carrying amounts of such assets, including goodwill, were compared to
their fair values. The inputs used for fair value measurements for goodwill, other intangible assets and long-lived
assets held and used are the lowest level (Level 3) inputs for which Quanta uses the assistance of third party
specialists to develop valuation assumptions.
Quanta also uses fair value measurements in connection with the valuation of its investments in private
company equity interests and financing instruments. These valuations require significant management judgment
due to the absence of quoted market prices, the inherent lack of liquidity and the long-term nature of such assets.
Typically, the initial costs of these investments are considered to represent fair market value, as such amounts are
negotiated between willing market participants. On a quarterly basis, Quanta performs an evaluation of its
investments to determine if an other-than-temporary decline in the value of each investment has occurred
and whether the recorded amount of each investment will be realizable. If an other-than-temporary decline in the
value of an investment occurs, a fair value analysis would be performed to determine the degree to which the
investment was impaired and a corresponding charge to earnings would be recorded during the period. These
types of fair market value assessments are similar to other fair value measures used by Quanta, which include the
use of significant judgment and available relevant market data. Such market data may include observations of the
valuation of comparable companies, risk adjusted discount rates and an evaluation of the expected performance
of the underlying portfolio asset, including historical and projected levels of profitability or cash flows. In
addition, a variety of additional factors will be reviewed by management, including, but not limited to,
contemporaneous financing and sales transactions with third parties, changes in market outlook and the thirdparty
financing environment.
3. NEW ACCOUNTING PRONOUNCEMENTS:
Adoption of New Accounting Pronouncements
During the quarter ended December 31, 2011, Quanta adopted Accounting Standards Update (ASU) 2011-
09, “Compensation — Retirement Benefits — Multiemployer Plans (Subtopic 715-80): Disclosures about an
Employer’s Participation in a Multiemployer Plan” (ASU 2011-09). This guidance requires employers to make
various disclosures for each individually significant multiemployer plan that provides pension benefits to its
employees. Generally, an employer must disclose the employer’s contributions to the plan during the period and
provide a description of the nature and effect of any significant changes that affect comparability of total
employer contributions from period to period. Additionally, the employer is required to provide a description of
the nature of the plan benefits, a qualitative description of the extent to which the employer could be responsible
for the obligations of the plan and other quantitative information, to the extent available, as of the most recent
date available, to help users understand the financial information for each significant plan. An employer should
also provide disclosures for total contributions made to all plans that are not individually significant and total
contributions made to all plans. If certain quantitative information cannot be obtained without undue cost and
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