Citrix 2012 Annual Report Download - page 44

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Management's estimates of fair value are based upon assumptions believed to be reasonable. Unanticipated events and
circumstances may occur which may affect the accuracy or validity of such assumptions, estimates or actual results.
We monitor acquired intangible assets for impairment on a periodic basis by reviewing indicators of impairment. If an
indicator exists we compare the estimated net realizable value to the unamortized cost of the intangible asset. The
recoverability of the intangible assets is primarily dependent upon our ability to commercialize products utilizing the acquired
technologies, retain existing customers and customer contracts, and maintain brand awareness. The estimated net realizable
value of the acquired intangible assets is based on the estimated undiscounted future cash flows derived from such intangible
assets. Our assumptions about future revenues and expenses require significant judgment associated with the forecast of the
performance of our products, customer retention rates and ability to secure and maintain our market position. Actual revenues
and costs could vary significantly from these forecasted amounts. As of December 31, 2012, the estimated undiscounted future
cash flows expected from product related technology assets and other intangible assets from these acquisitions is sufficient to
recover their carrying value. If these products are not ultimately accepted by our customers and distributors, and there is no
alternative future use for the technology; or if we fail to retain acquired customers or successfully market acquired brands, we
could determine that some or all of the remaining $556.2 million carrying value of our acquired intangible assets is impaired. In
the event of impairment, we would record an impairment charge to earnings that could have a material adverse effect on our
results of operations.
Goodwill
The excess of the fair value of purchase price over the fair values of the identifiable assets and liabilities from our
acquisitions is recorded as goodwill. At December 31, 2012, we had $1,518.2 million in goodwill related to our acquisitions.
The goodwill recorded in relation to these acquisitions is not deductible for tax purposes. Our revenues are derived from sales
of our Enterprise division products, which include our Mobile and Desktop products, Networking and Cloud products and
related license updates and maintenance and from sales of our Online Services division’s Collaboration and Data products. The
Enterprise division and the Online Services division constitute our two reportable segments. See Note 11 to our consolidated
financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2012 for additional
information regarding our reportable segments. We evaluate goodwill between these segments, which represent our reporting
units.
We account for goodwill in accordance with FASB’s authoritative guidance, which requires that goodwill and certain
intangible assets are not amortized, but are subject to an annual impairment test. We complete our goodwill and certain
intangible assets impairment test on an annual basis, during the fourth quarter of our fiscal year, or more frequently, if changes
in facts and circumstances indicate that an impairment in the value of goodwill and certain intangible assets recorded on our
balance sheet may exist. In 2011, we early adopted the authoritative guidance, which provides entities with an option to
perform a qualitative assessment to determine whether further quantitative impairment testing for goodwill and certain
intangible assets is necessary, which we refer to as the Qualitative Screen. In performing the Qualitative Screen, we are
required to make assumptions and judgments including but not limited to the following: the evaluation of macroeconomic
conditions as related to our business, industry and market trends, and the overall future financial performance of our reporting
units and future opportunities in the markets in which they operate. If after performing the Qualitative Screen impairment
indicators are present, we would perform a quantitative impairment test to estimate the fair value of goodwill and certain
intangible assets. In doing so, we would estimate future revenue, consider market factors and estimate our future cash flows.
Based on these key assumptions, judgments and estimates, we determine whether we need to record an impairment charge to
reduce the value of the goodwill and certain intangible assets carried on our balance sheet to its estimated fair value.
Assumptions, judgments and estimates about future values are complex and often subjective and can be affected by a variety of
factors, including external factors such as industry and economic trends, and internal factors such as changes in our business
strategy or our internal forecasts. Although we believe the assumptions, judgments and estimates we have made have been
reasonable and appropriate, different assumptions, judgments and estimates could materially affect our results of operations.
We performed the Qualitative Screen for our goodwill impairment test in the fourth quarter of 2012. As a result of the
Qualitative Screen, no further quantitative impairment test was deemed necessary. There was no impairment of goodwill as a
result of the annual impairment tests completed during the fourth quarters of 2012 and 2011.