Columbia Sportswear 2014 Annual Report Download - page 45

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Impairment of Long-Lived Assets, Intangible Assets and Goodwill
Long-lived assets are amortized over their estimated useful lives and are measured for impairment only when events
or circumstances indicate the carrying value may be impaired. In these cases, we estimate the future undiscounted cash
flows to be derived from the asset or asset group to determine whether a potential impairment exists. If the sum of the
estimated undiscounted cash flows is less than the carrying value of the asset, we recognize an impairment loss, measured
as the amount by which the carrying value exceeds the estimated fair value of the asset.
We review and test our intangible assets with indefinite useful lives and goodwill for impairment in the fourth quarter
of each year and when events or changes in circumstances indicate that the carrying amount of such assets may be impaired.
Our intangible assets with indefinite lives consist of trademarks and trade names. Substantially all of our goodwill is
recorded in the United States segment and impairment testing for goodwill is performed at the reporting unit level. In the
impairment test for goodwill, the two-step process first compares the estimated fair value of the reporting unit with the
carrying amount of that reporting unit. We estimate the fair value of our reporting units using a combination of discounted
cash flow analysis, comparisons with the market values of similar publicly traded companies and other operating performance
based valuation methods, as necessary. If step one indicates impairment, step two compares the estimated fair value of the
reporting unit to the estimated fair value of all reporting unit assets and liabilities, except goodwill, to determine the implied
fair value of goodwill. We calculate impairment as the excess of carrying amount of goodwill over the implied fair value
of goodwill. In the impairment tests for trademarks and trade names, we compare the estimated fair value of each asset to
its carrying amount. The fair values of trademarks and trade names are generally estimated using a relief from royalty
method under the income approach. If the carrying amount of a trademark or trade name exceeds its estimated fair value,
we calculate impairment as the excess of carrying amount over the estimate of fair value.
If events or circumstances indicate the carrying value of intangible assets with finite lives may be impaired, we estimate
the future undiscounted cash flows to be derived from the asset or asset group to determine whether a potential impairment
exists. If the sum of the estimated undiscounted cash flows is less than the carrying value of the asset, we recognize an
impairment loss, measured as the amount by which the carrying value exceeds the estimated fair value of the asset.
Impairment charges are classified as a component of SG&A expense. The impairment tests and related fair value
estimates are based on a number of factors, including assumptions and estimates for projected sales, income, cash flows,
discount rates, remaining useful lives and other operating performance measures. Changes in estimates or the application
of alternative assumptions could produce significantly different results. These assumptions and estimates may change in
the future due to changes in economic conditions, changes in our ability to meet sales and profitability objectives or changes
in our business operations or strategic direction.
Acquisition Accounting
We account for business combinations using the purchase method, which requires us to allocate the cost of an acquired
business to the acquired assets and liabilities based on their estimated fair values at the acquisition date. We recognize the
excess of an acquired business' cost over the fair value of the acquired assets and liabilities as goodwill. Determining the
fair value of certain assets and liabilities acquired is judgmental in nature and often involves the use of significant estimates
and assumptions. We use a variety of information sources to determine the fair value of acquired assets and liabilities and
we generally use third party appraisers to assist us in the determination of the fair value and useful lives of identifiable
intangible assets.
Income Taxes
We use the asset and liability method of accounting for income taxes. Under this method, we recognize income tax
expense for the amount of taxes payable or refundable for the current year and for the amount of deferred tax liabilities and
assets for the future tax consequences of events that have been recognized in our financial statements or tax returns. We
make assumptions, judgments and estimates to determine our current provision for income taxes, our deferred tax assets
and liabilities, and our uncertain tax positions. Our judgments, assumptions and estimates relative to the current provision
for income tax take into account current tax laws, our interpretation of current tax laws and possible outcomes of current
and future audits conducted by foreign and domestic tax authorities. Changes in tax law or our interpretation of tax laws
and the resolution of current and future tax audits could significantly affect the amounts provided for income taxes in our
consolidated financial statements. Our assumptions, judgments and estimates relative to the value of a deferred tax asset