Enom 2014 Annual Report Download - page 77

F-13
Capitalized media content is amortized on a straight-line basis over its useful life, which is typically five years, representing our
estimate of when the underlying economic benefits are expected to be realized and based on our estimates of the projected cash flows
from advertising revenue expected to be generated by the deployment of such content. These estimates are based on our plans and
projections, comparison of the economic returns generated by our content with content of comparable quality and an analysis of
historical cash flows generated by that content to date. Amortization of media content is included in amortization of intangible assets
in the accompanying consolidated statement of operations and the acquisition costs are included in purchases of intangible assets
within cash flows from investing activities in the accompanying consolidated statements of cash flows.
Google, Yahoo! and Bing, are the largest provider of search engine referrals to the majority of our online properties, they
regularly deploy changes to their search engine algorithms, some of which have led us to experience fluctuations in the total number
of Google search referrals to our owned and operated online properties and our customers’ online properties. To date, the overall
impact of these changes on our owned and operated websites was negative primarily due to a decline in traffic to eHow.com, our
largest website. In response to changes in search engine algorithms since 2011, we have performed evaluations of our existing content
library to identify potential improvements in our content creation and distribution platform. As a result of these evaluations, we
elected to remove certain content units from our content library, resulting in $7.7 million, $2.4 million, $2.1 million and $5.9 million
of related accelerated amortization expense in 2014, 2013, 2012 and 2011, respectively. We expect to remove additional content over
the next year, which may result in significant additional accelerated amortization in the periods such actions occur.
Intangibles Assets — Acquired in Business Combinations
We perform valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination
and allocate the purchase price of each acquired business to our respective net tangible and intangible assets. Acquired intangible
assets include: trade names, non-compete agreements, owned website names, artist relationships, customer relationships, technology,
media content, and content publisher relationships. We determine the appropriate useful life by performing an analysis of expected
cash flows based on historical experience of the acquired businesses. Intangible assets are amortized over their estimated useful lives
using the straight-line method which approximates the pattern in which the economic benefits are consumed.
Long-lived Assets
We evaluate the recoverability of our long-lived tangible and intangible assets with finite useful lives for impairment when
events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Such trigger events or
changes in circumstances may include: a significant decrease in the market price of a long-lived asset, a significant adverse change in
the extent or manner in which a long-lived asset is being used, a significant adverse change in legal factors or in the business climate,
including those resulting from technology advancements in the industry, the impact of competition or other factors that could affect
the value of a long-lived asset, a significant adverse deterioration in the amount of revenue or cash flows we expect to generate from
an asset group, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or development
of a long-lived asset, current or future operating or cash flow losses that demonstrate continuing losses associated with the use of a
long-lived asset, or a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of
significantly before the end of its previously estimated useful life. We perform impairment testing at the asset group level that
represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. If
events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable and the expected
undiscounted future cash flows attributable to the asset group are less than the carrying amount of the asset group, an impairment loss
equal to the excess of the asset’s carrying value over its fair value is recorded. Fair value is determined based upon estimated
discounted future cash flows. In light of recent revenue declines we have evaluated certain of our long-lived assets for impairment,
however, through December 31, 2014, we have identified no such impairment losses. Assets to be disposed of would be separately
presented on the balance sheets and reported at the lower of their carrying amount or fair value less costs to sell, and would no longer
be depreciated or amortized.
Goodwill
Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets. Goodwill is tested
for impairment annually during the fourth quarter of our fiscal year or when events or circumstances change in a manner that indicates
goodwill might be impaired. Events or circumstances that 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 personnel, significant changes in the manner of our use of the acquired assets or the strategy for our overall
business, significant negative industry or economic trends, a decline in our stock price leading to an extended period when our market
capitalization is less than the book value of our net assets or significant underperformance relative to expected historical or projected
future results of operations.