Cash America 2015 Annual Report Download - page 25

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attention of the Company’s management and could require the expenditure of significant amounts for legal fees and
other related costs. The Company is also subject to regulatory proceedings, and the Company could suffer losses
from interpretations of applicable laws, rules and regulations in those regulatory proceedings, even if the Company
is not a party to those proceedings. In addition, adverse court interpretations of the various laws and regulations
under which the Company operates could require the Company to alter the products that it offers or cease doing
business in the jurisdiction where the court interpretation is applicable. Any of these events could have a Material
Adverse Effect.
The Company is subject to impairment risk, and goodwill impairment charges could have a Material Adverse
Effect.
AsofDecember31,2015,theCompanyhadgoodwilltotaling$488.0millionandintangibleassets,netof
accumulated amortization, of $39.5 million on its consolidated balance sheet. Of this amount of intangible assets,
the Company had licenses and trademarks with carrying values of $9.7 million and $5.3 million, respectively, as of
December31,2015and2014thatwereindefinite-livedintangibleassetsandnotamortized.Goodwillrepresentsthe
excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each
business combination. Accounting for goodwill and intangible assets requires significant management estimates and
judgment. Events may occur in the future, and the Company may not realize the value of its goodwill or intangible
assets. The Company tests goodwill and intangible assets with an indefinite life for potential impairment annually as
of June 30 and between annual tests if an event occurs or circumstances change that would more likely than not
reduce the fair value of the Company below its carrying amount.
The Company completed its annual assessment of goodwill as of June 30, 2015 and determined that the fair
value for the Company’s reporting unit exceeded its carrying value, and, as a result, no impairment was indicated at
that date. AsofJune30,2015,theexcessfairvalueoverthecarryingvaluewas9%.A change in calculation
assumptions, such as an increase in the weighted-average cost of capital, could cause the carrying value of the
reporting unit to exceed its fair value as of June 30, 2015, which could have potentially resulted in an impairment
loss.
As part of the goodwill assessment, the Company also considers the market value of its equity, which is the
observable market value of the Company based on the quoted market prices of the Company’s common stock at the
measurement date. The Company compares the market value of its equity to the carrying value of its equity. As of
June30,2015,themarketvalueoftheCompany’sequitywasobservedtobelowerthanthecarryingvalueof
equity. Management continues to acknowledge the need to monitor and re-evaluate any future discrepancies
between these values and consider the implications for an impairment of goodwill in future periods.
The Company is considered to be at risk for a future impairment of its goodwill in the event of a decline in
general economic, market or business conditions, or if there are any significant unfavorable changes in the
Company’s forecasted revenue, expenses, cash flows, weighted-average cost of capital and/or market transaction
multiples. Any of these factors could represent a potential triggering event that would indicate an impairment review
should be performed. The Company will continue to monitor for events and circumstances that could negatively
impact the key assumptions in determining its fair value.
Should a review indicate impairment, a write-down of the carrying value of the goodwill or intangible asset
would occur, resulting in a non-cash charge, which could have a Material Adverse Effect and could also lead to the
Company’s inability to comply with certain covenants in the Company’s financing documents, which could cause a
default under those agreements.
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