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andtimingofchargesforanyperiodifmanagementmakesdifferentjudgmentsorutilizesdifferent
estimatesinevaluatingthesequalitativefactors.
IncomeTaxes.Werecordataxprovisionfortheanticipatedtaxconsequencesofthereported
resultsofoperations.InaccordancewithFASBincometaxguidance(“ASCTopic740”),theprovisionfor
incometaxesiscomputedusingtheassetandliabilitymethod,underwhichdeferredtaxassetsand
liabilitiesarerecognizedfortheexpectedfuturetaxconsequencesattributabletodifferencesbetweenthe
financialstatementcarryingamountsofexistingassetsandliabilitiesandtheirrespectivetaxbasesand
operatinglossesandtaxcreditcarryforwards.Deferredtaxassetsandliabilitiesaremeasuredusingenacted
taxratesexpectedtoapplytotaxableincomeintheyearsinwhichthosetemporarydifferencesare
expectedtoberecoveredorsettled.Werecordavaluationallowancetoreducedeferredtaxassetstothe
amountthatisbelievedmorelikelythannottoberealized.
Managementbelievesitismorelikelythannotthatforecastedincome,includingincomethatmay
begeneratedasaresultofcertaintaxplanningstrategies,togetherwiththetaxeffectsofthedeferredtax
liabilities,willbesufficienttofullyrecovertheremainingdeferredtaxassets.Intheeventthatallorpartof
thenetdeferredtaxassetsaredeterminednottoberealizableinthefuture,anadjustmenttothevaluation
allowancewouldbechargedtoearningsintheperiodsuchdeterminationismade.Inaddition,the
calculationoftaxliabilitiesinvolvessignificantjudgmentinestimatingtheimpactofuncertaintiesinthe
applicationofASCTopic740andothercomplextaxlaws.Resolutionoftheseuncertaintiesinamanner
inconsistentwithmanagement’sexpectationscouldhaveamaterialimpactonourfinancialconditionand
operatingresults.
FairValueEstimates
ThepreparationoffinancialstatementsinconformitywithU.S.GAAPoftenrequiresusto
determinethefairvalueofaparticularitemtofairlypresentourConsolidatedFinancialStatements.
Withoutanindependentmarketoranotherrepresentativetransaction,determiningthefairvalueofa
particularitemrequiresustomakeseveralassumptionsthatareinherentlydifficulttopredictandcanhave
amaterialimpactontheconclusionoftheappropriateaccounting.
Therearevariousvaluationtechniquesusedtoestimatefairvalue.Theseinclude(1)themarket
approachwheremarkettransactionsforidenticalorcomparableassetsorliabilitiesareusedtodetermine
thefairvalue,(2)theincomeapproach,whichusesvaluationtechniquestoconvertfutureamounts(for
example,futurecashflowsorfutureearnings)toasinglepresentamount,and(3)thecostapproach,which
isbasedontheamountthatwouldberequiredtoreplaceanasset.Formanyofourfairvalueestimates,
includingourestimatesofthefairvalueofacquiredintangibleassets,weusetheincomeapproach.Using
theincomeapproachrequirestheuseoffinancialmodels,whichrequireustomakevariousestimates
including,butnotlimitedto(1)thepotentialfuturecashflowsfortheasset,liabilityorequityinstrument
beingmeasured,(2)thetimingofreceiptorpaymentofthosefuturecashflows,(3)thetimevalueof
moneyassociatedwiththedelayedreceiptorpaymentofsuchcashflows,and(4)theinherentrisk
associatedwiththecashflows(riskpremium).Makingthesecashflowestimatesisinherentlydifficultand
subjective,and,ifanyoftheestimatesusedtodeterminethefairvalueusingtheincomeapproachturnsout
tobeinaccurate,ourfinancialresultsmaybenegativelyimpacted.Furthermore,relativelysmallchangesin
manyoftheseestimatescanhaveasignificantimpactontheestimatedfairvalueresultingfromthe
financialmodelsortherelatedaccountingconclusionreached.Forexample,arelativelysmallchangein
theestimatedfairvalueofanassetmaychangeaconclusionastowhetheranassetisimpaired.Whilewe
arerequiredtomakecertainfairvalueassessmentsassociatedwiththeaccountingforseveraltypesof
transactions,thefollowingareasarethemostsensitivetotheassessments:
BusinessCombinations.Wemustestimatethefairvalueofassetsacquiredandliabilitiesassumed
inabusinesscombination.Ourassessmentoftheestimatedfairvalueofeachofthesecanhaveamaterial
effectonourreportedresultsasintangibleassetsareamortizedovervariouslives.Furthermore,achangein
theestimatedfairvalueofanassetorliabilityoftenhasadirectimpactontheamounttorecognizeas
goodwill,whichisanassetthatisnotamortized.Oftendeterminingthefairvalueoftheseassetsand
liabilitiesassumedrequiresanassessmentofexpecteduseoftheasset,theexpectedcosttoextinguishthe
liabilityorourexpectationsrelatedtothetimingandthesuccessfulcompletionofdevelopmentofan