Classmates.com 2008 Annual Report Download - page 52

Table of Contents
operations. We concluded that goodwill in the Interflora reporting unit was not impaired as of December 31, 2008.
An increase or decrease of 100 basis points in the discount rate or the terminal growth rate for the Interflora, Classmates, MyPoints and
Communications reporting units would not have resulted in any goodwill impairment. An increase of 100 basis points in the discount rate for the
FTD reporting unit would have resulted in an additional impairment charge of $20.3 million and a decrease of 100 basis points in the discount
rate for the FTD reporting unit would have resulted in a $24.5 million reduction in the impairment charge. A 100 basis point increase in the
terminal growth rate would have resulted in a $18.7 million reduction in the impairment charge and a 100 basis point decrease in the terminal
growth rate would have resulted in a $15.6 million increase in the impairment charge. We believe the assumptions and rates used in our
impairment assessment are reasonable, but they are judgmental, and variations in any assumptions could result in a materially different
calculation of the impairment amount.
Intangible Assets and Other Long
-Lived Assets
We account for identifiable intangible assets and other long-lived assets in accordance with SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets , which addresses financial accounting and reporting for the impairment and disposition of identifiable
intangible assets and other long-
lived assets. Intangible assets acquired in a business combination are initially recorded at management's estimate
of their fair values. We evaluate the recoverability of identifiable intangible assets and other long-lived assets, other than indefinite-lived
intangible assets, for impairment when events occur or circumstances change that would indicate that the carrying amount of an asset may not be
recoverable. Events or circumstances that may indicate that an asset is impaired include, but are not limited to, significant decreases in the
market value of an asset, significant underperformance relative to expected historical or projected future operating results, a change in the extent
or manner in which an asset is used, shifts in technology, loss of key management or other personnel, significant negative industry or economic
trends, changes in our operating model or strategy, and competitive forces. In determining if an impairment exists, we estimate the undiscounted
cash flows to be generated from the use and ultimate disposition of these assets. If an impairment is indicated based on a comparison of the
assets' carrying values and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amount of the
assets exceeds the fair market value of the assets. Definite-lived intangible assets are amortized on either a straight-line basis or an accelerated
basis over their estimated useful lives, ranging from two to ten years. Our identifiable intangible assets were acquired primarily in connection
with business combinations. In the quarter ended December 31, 2008, we recorded an impairment charge of certain long-lived assets of
$0.3 million associated with the Communications segment.
The process of evaluating the potential impairment of long-
lived intangible assets is subjective and requires significant judgment on matters
such as, but not limited to, the asset group to be tested for recoverability. We are also required to make estimates that may significantly impact
the outcome of the analyses. Such estimates include, but are not limited to, future operating performance and cash flows, cost of capital, terminal
values, and remaining economic lives of assets.
Member Redemption Liability
Member redemption liability for loyalty marketing points represents the estimated costs associated with the obligation of MyPoints to
redeem outstanding points accumulated by its loyalty marketing members as well as those points purchased by its advertisers for use in such
advertisers' promotion campaigns as they have been earned by MyPoints' members, less an allowance for points expected to expire prior to
redemption. The estimated cost of points is primarily presented in cost of revenues, except for the portion related to member acquisition
activities, internal marketing surveys and other
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