2K Sports 2009 Annual Report Download - page 92

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7. FIXED ASSETS, NET
As of October 31, 2009 and 2008, fixed assets consisted of:
October 31,
2009 2008
Computer equipment $34,622 $31,002
Office equipment 5,602 4,517
Computer software 28,730 23,345
Furniture and fixtures 5,392 4,989
Leasehold improvements 24,190 22,378
98,536 86,231
Less: accumulated depreciation 71,144 53,870
Fixed assets, net $27,392 $32,361
Depreciation expense related to fixed assets for the years ended October 31, 2009, 2008, and 2007, was
$16,487, $21,526 and $24,115, respectively.
8. GOODWILL AND INTANGIBLE ASSETS, NET
We perform an annual two-step test for impairment of goodwill in the fourth quarter of each fiscal year or
earlier if indicators of impairment exist. The first step of the test measures impairment by applying fair
value-based tests at the reporting unit level. The second step (if necessary) measures the amount of
impairment by applying fair value-based tests to individual assets and liabilities within each reporting unit.
For purposes of the impairment test, we have determined that our publishing and distribution segment
represent components of our operating segments that constitute businesses for which both (1) discrete
financial information is available and (2) segment management regularly reviews the operating results of
these components which are deemed reporting units.
We use a combination of the market approach, and the income approach, which uses discounted cash
flows. Each step requires us to make judgments and involves the use of significant estimates and
assumptions. These estimates and assumptions include long-term growth rates and operating margins used
to calculate projected future cash flows, risk-adjusted discount rates based on our weighted average cost of
capital, future economic and market conditions and the determination of appropriate market comparables.
These estimates and assumptions are made for each of our determined reporting units. Our estimates for
market growth are based on historical data, various internal estimates and observable external sources
when available, and are based on assumptions that are consistent with the plans and estimates we use to
manage the underlying business. Due to a decline in the retail environment in 2009 and its impact on our
outlook for our distribution reporting unit we determined that goodwill attributed to our distribution
reporting unit was impaired. As a result, we recorded an impairment charge of $14,462 related to this
reporting unit in the fourth quarter of 2009, which is included in the impairment of goodwill and long-lived
assets in our consolidated statement of operations. For the fiscal years 2008 and 2007 we did not recognize
an impairment loss on goodwill. See Note 15 for Segment and Geographic information.
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