Classmates.com 2010 Annual Report Download - page 29

Table of Contents
an impairment test of our goodwill and indefinite-lived intangible assets annually during the fourth quarter of our fiscal year or when events
occur or circumstances change that would more likely than not indicate that goodwill or any such assets might be permanently impaired. If our
acquisitions or business initiatives are not commercially successful or, if due to economic or other conditions, our assumptions regarding the
performance of such businesses or business initiatives are not achieved, we would likely be required to record impairment charges which would
negatively impact our financial condition and results of operations. We have experienced impairment charges in the past. Given the current
economic environment and the uncertainties regarding the impact on our businesses, there can be no assurance that our estimates and
assumptions regarding the duration of the challenging economic conditions, or the period or strength of recovery, made for purposes of our
goodwill and identifiable intangible assets impairment testing will prove to be accurate predictions of the future. If our assumptions regarding
forecasted revenue or growth rates of certain reporting units or other factors are not achieved or are revised downward, we may be required to
record additional impairment charges in future periods. In addition, from time to time, we record tangible or intangible assets on our balance
sheet that, due to changes in value or in our strategy, may have to be expensed in future periods. Write-downs or impairments of assets, whether
tangible or intangible, could adversely and materially impact our financial condition and results of operations.
Our ability to operate our business could be seriously harmed if we lose members of our senior management team or other key employees.
Our business is largely dependent on the efforts and abilities of our senior management, particularly Mark R. Goldston, our chairman,
president and chief executive officer, and other key personnel. Any of our officers or employees can terminate his or her employment
relationship at any time. The loss of any of these key employees or our inability to attract or retain other qualified employees could seriously
harm our business and prospects. We do not carry key-person life insurance on any of our employees.
Foreign, state and local governments may attempt to impose additional income taxes, sales and use taxes, value-
added taxes or other taxes on
our business activities and Internet-based transactions, including our past sales, which could decrease our ability to compete, reduce our
sales, or have a material adverse effect on our business, financial condition, results of operations, and cash flows.
We are subject to income and various other taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in
evaluating our worldwide provision for income taxes. During the ordinary course of business, there are many transactions for which the ultimate
tax determination is uncertain. In addition, our effective income tax rates could be adversely affected by earnings being lower than anticipated in
countries where we have lower statutory rates and higher (or determined to be higher by a particular taxing jurisdiction) than anticipated in
countries where we have higher statutory rates, by changes in the valuation of our deferred tax assets and liabilities or by, among other factors,
changes in the relevant tax, accounting and other laws, regulations, principles, and interpretations. We are subject to audit in various
jurisdictions, and such jurisdictions may assess additional income and other taxes against us. Although we believe our tax estimates are
reasonable, the final determination of tax audits and any related litigation could be materially different from our historical income tax provisions,
and our historical recognition of other tax matters. The results of an audit or litigation could have a material effect on our business, financial
condition, results of operations, and cash flows.
In connection with our Internet-based transactions, a number of states have been considering or adopting legislation or instituting policy
initiatives, including those that would facilitate a finding of nexus to exist between Internet companies with the states, aimed at expanding the
reach of sales and use taxes or imposing state income or other taxes on various innovative theories, including agency
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