Classmates.com 2009 Annual Report Download - page 51

Table of Contents
change that would more likely than not indicate that the goodwill and/or indefinite-lived intangible assets might be permanently impaired.
Events or circumstances which could trigger an impairment review include, but are not limited to, a significant adverse change in legal factors or
in the business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key management or other personnel,
significant changes in the manner of our use of the acquired assets or the strategy for the acquired business or our overall business, significant
negative industry or economic trends, or significant underperformance relative to expected historical or projected future results of operations.
The determination of whether or not goodwill is impaired involves a significant level of judgment in the assumptions underlying the
approaches used to determine the estimated fair values of our reporting units. The determination of the fair values of our reporting units
generally includes a study of market comparables, including the selection of appropriate valuation multiples and discounted cash flow models
based on our internal forecasts and projections. The estimated fair value of each of our reporting units is determined using a combination of the
income approach and the market approach.
Indefinite
-Lived Intangible Assets
Testing indefinite-lived intangible assets, other than goodwill, for impairment requires a one-step approach under ASC 350. We test
indefinite-lived intangible assets for impairment on an annual basis, or more frequently, if events occur or circumstances change that indicate
they may be impaired. The fair values of indefinite-lived intangible assets are compared to their carrying values and if the carrying amount of
indefinite-lived intangible assets exceeds the fair value, an impairment loss is recognized equal to the excess.
The process of estimating the fair value of indefinite-lived intangible assets is subjective and requires us 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.
Goodwill
We operate in three reportable segments, in accordance with ASC 280, Segment Reporting , and we have identified five reporting units—
FTD, Interflora, Classmates Online, MyPoints, and Communications—
for purposes of evaluating goodwill. These reporting units each constitute
a business or group of businesses for which discrete financial information is available and is regularly reviewed by segment management. The
goodwill related to our acquired businesses is specific to each reporting unit and the goodwill amounts are assigned as such.
Testing goodwill for impairment involves a two-step process. The first step of the impairment test involves comparing the estimated fair
values of each of our reporting units with their respective net book values, including goodwill. If the estimated fair value of a reporting unit
exceeds its net book value, including goodwill, goodwill is considered not to be impaired and no additional steps are necessary. If, however, the
estimated fair value of the reporting unit is less than its net book value, including goodwill, then the carrying amount of the goodwill is
compared with its implied fair value. If the carrying amount of goodwill exceeds the implied fair value of that goodwill, an impairment loss is
recognized in an amount equal to the excess.
We performed step one of our annual goodwill impairment test in the fourth quarter of 2009 and determined that the fair value of our FTD,
Interflora, Classmates Online, MyPoints, and Communications reporting units exceeded their net book values, including goodwill. Accordingly,
step two was not required.
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