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Table of Contents
EARTHLINK HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
weighting of the income and market approaches. These models use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy. Under
the income approach, the fair value of the reporting unit was estimated based on the present value of estimated cash flows using a discounted cash flow method.
The significant assumptions used in the discounted cash flow method included internal forecasts and projections developed by management for planning purposes,
available industry/market data, strategic plans, discount rates and the growth rate to calculate the terminal value. Under the market approach, the fair value was
estimated using the guideline company method. The Company selected guideline companies in the industry in which each reporting unit operates.
Upon completion of the first step, the Company determined that the carrying value of its Business Services reporting unit exceeded its estimated fair value, so a
second step was performed to compare the carrying amount of goodwill to the implied fair value of that goodwill. The implied fair value of goodwill for the
Business Services reporting unit was determined in the same manner as utilized to recognize goodwill in a business combination. To determine the implied value of
goodwill, estimated fair values were allocated to the identifiable assets and liabilities of the Business Services reporting unit as of March 31, 2013. The implied fair
value of goodwill was measured as the excess of the fair value of the Business Services reporting unit over the fair value of its identifiable assets and liabilities.
The impairment loss of $256.7 million during the first quarter 2013 was measured as the amount the carrying value of goodwill exceeded the implied fair value of
the goodwill. Of this amount, $49.3 million was deductible for tax purposes.
Annual Tests of Goodwill . The annual impairment test during the fourth quarters of 2013 , 2014 and 2015 indicated that the fair value of the Company's reporting
units exceeded their carrying values.
The Company elected to forgo the qualitative assessment of goodwill for its fiscal 2015 impairment test. The Company identified four reporting units for
evaluating goodwill for the 2015 annual impairment test, which were Enterprise/Mid-Market, Small Business, Carrier/Transport and Consumer Services. Each of
these reporting units constitutes a business for which discrete financial information is available and segment management regularly reviews the operating results.
The Company evaluates its reporting units on an annual basis.
The Company estimated the fair values of its reporting units based on the income approach. This models use significant unobservable inputs, or Level 3 inputs, as
defined by the fair value hierarchy. Under the income approach, the fair value of the reporting unit was estimated based on the present value of estimated cash
flows using a discounted cash flow method. The significant assumptions used in the discounted cash flow method included internal forecasts and projections
developed by management for planning purposes, available industry/market data, strategic plans, discount rates and the growth rate to calculate the terminal value.
Definite-Lived Intangible Assets . The Company did not record any impairment charges for its definite-lived intangible assets during the years ended December 31,
2013, 2014 and 2015 .
6. Other Accrued Liabilities
The Company's other accrued liabilities consisted of the following as of December 31, 2014 and 2015 :
December 31, 2014
December 31, 2015
(in thousands)
Accrued taxes and surcharges $ 17,801
$ 14,663
Accrued communications costs 25,917
23,201
Customer-related liabilities 9,565
7,854
Accrued interest 5,251
3,822
Accrued dividends 6,780
776
Other 19,867
13,989
Total other accrued liabilities $ 85,181
$ 64,305
75