Hasbro 2013 Annual Report Download - page 76

HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)
(4) Goodwill and Intangibles
Goodwill and certain intangible assets relating to rights obtained in the Company’s acquisition of Milton
Bradley in 1984 and Tonka in 1991 are not amortized. These rights were determined to have indefinite lives and
total approximately $75,700. The Company’s other intangible assets are amortized over their remaining useful
lives, and accumulated amortization of these other intangibles is reflected in other intangibles, net in the
accompanying consolidated balance sheets.
The Company performs an annual impairment test on goodwill and intangible assets with indefinite
lives. This annual impairment test is performed in the fourth quarter of the Company’s fiscal year. In addition, if
an event occurs or circumstances change that indicate that the carrying value may not be recoverable, the
Company will perform an interim impairment test at that time. For the three fiscal years ended December 29,
2013, no such events occurred. The Company completed its annual impairment tests of goodwill in the fourth
quarters of 2013, 2012 and 2011 concluding that the fair value of each reporting unit substantially exceeded the
carrying value and therefore, no impairment charges were taken in each of the three years.
A portion of the Company’s goodwill and other intangible assets reside in the Corporate segment of the
business. For purposes of the goodwill impairment testing, these assets are allocated to the reporting units within
the Company’s operating segments. Changes in the carrying amount of goodwill, by operating segment, for the
years ended December 29, 2013 and December 30, 2012 are as follows:
U.S. and
Canada International
Entertainment
and Licensing Total
2013
Balance at December 30, 2012 ............. $296,978 171,451 6,496 474,925
Acquired during the period ................ — — 119,111 119,111
Foreign exchange translation .............. — 285 — 285
Balance at December 29, 2013 ............. $296,978 171,736 125,607 594,321
2012
Balance at December 25, 2011 ............. $296,978 171,318 6,496 474,792
Foreign exchange translation .............. — 133 — 133
Balance at December 30, 2012 ............. $296,978 171,451 6,496 474,925
On July 8, 2013, the Company acquired a majority interest in Backflip Studios, LLC (“Backflip”), a mobile
game developer based in Boulder, Colorado. The Company paid $112,000 in cash to acquire a 70% interest in
Backflip, and will be required to purchase the remaining 30% in the future contingent on the achievement by
Backflip of certain predetermined financial performance metrics. The Company is consolidating the financial
statements of Backflip and reporting the 30% redeemable noncontrolling interests as a separate line in the
consolidated balance sheets and statements of operations.
Based on a valuation of approximately $160,000, the Company has allocated approximately $6,000 to net
tangible assets, $35,000 to identifiable intangible assets, $119,000 to goodwill, and $48,000 to redeemable
noncontrolling interests. The valuation was based on the income approach which utilizes discounted future cash
flows expected to be generated from the acquired business. Identifiable intangible assets include property rights
which are being amortized over the projected revenue curve over a period of four years. During 2013,
amortization of intangibles includes $8,100 related to these assets. Goodwill reflects the value to the Company
from leveraging Backflip’s expertise in developing and marketing mobile digital games, including the continued
expansion of its own brands in this arena. The goodwill recorded as part of this acquisition will be reflected in
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