Citrix 2014 Annual Report Download - page 45

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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, 2014, 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 $390.7 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, 2014, we had $1.80 billion 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 and Service Provider division products, which include our Workspace Services solutions, Delivery Networking
products and related license updates and maintenance and from sales of our Mobility Apps division’s Communications Cloud,
Documents Cloud and Workflow Cloud products. The Enterprise and Service Provider division and the Mobility Apps 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, 2014 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 the fourth quarter of 2014, we performed a qualitative assessment to determine whether further quantitative
impairment testing for goodwill and certain intangible assets is necessary, which we refer to this assessment 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. 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 2014 and 2013.
Income Taxes
We are required to estimate our income taxes in each of the jurisdictions in which we operate as part of the process of
preparing our consolidated financial statements. At December 31, 2014, we had approximately $164.3 million in net deferred
tax assets. The authoritative guidance requires a valuation allowance to reduce the deferred tax assets reported if, based on the
weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. We
review deferred tax assets periodically for recoverability and make estimates and judgments regarding the expected geographic
sources of taxable income and gains from investments, as well as tax planning strategies in assessing the need for a valuation
allowance. At December 31, 2014, we determined that a $15.2 million valuation allowance relating to deferred tax assets for
net operating losses and tax credits was necessary. If the estimates and assumptions used in our determination change in the
future, we could be required to revise our estimates of the valuation allowances against our deferred tax assets and adjust our
provisions for additional income taxes.
In the ordinary course of global business, there are transactions for which the ultimate tax outcome is uncertain, thus
judgment is required in determining the worldwide provision for income taxes. We provide for income taxes on transactions
based on our estimate of the probable liability. We adjust our provision as appropriate for changes that impact our underlying