LifeLock 2013 Annual Report Download - page 58

step to all of the assets and liabilities of that reporting unit, as if a market participant just acquired the reporting unit in a business combination. The excess of
the fair value of the reporting unit determined in the first step of the impairment test over the total amount assigned to the assets and liabilities in the second
step of the impairment test represents the implied fair value of goodwill. If the carrying value of a reporting unit’s goodwill exceeds the implied fair value of
goodwill, we will record an impairment loss equal to the difference. If there is no such excess, then all goodwill for a reporting unit is considered not to be
impaired.
Other intangible assets consist of existing technologies, customer relationships, trade names, and trademarks. Purchased intangible assets, other than
goodwill, are amortized over their estimated useful lives based upon the estimated economic value derived from the related intangible assets.

We have two operating segments, a consumer segment and an enterprise segment, which are the same as our two reporting segments. These operating
segments are components for which separate financial information is available and for which operating results are evaluated on a regular basis by the chief
operating decision maker in deciding how to allocate resources and in assessing the performance of the segments.
In our consumer segment, we offer identity theft protection services to consumers on a monthly or annual subscription basis. In our enterprise segment,
we offer fraud and risk solutions to enterprise customers who pay us based on their monthly volume of transactions with us .

We have granted certain stock warrants that are exercisable for shares of our convertible redeemable preferred and common stock. Warrants to acquire
convertible redeemable preferred stock are accounted for as liabilities and recognized at their fair value. The carrying value of such warrants is adjusted to fair
value at each balance sheet date, with the change in the fair value being recorded as a component of other income (expense). Upon the completion of our IPO in
October 2012, the warrants to purchase our convertible redeemable preferred stock were converted to warrants to purchase common stock and, at that time,
were reclassified to equity. Warrants to acquire common stock are recorded in equity on issuance.

We have deferred tax assets and liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes. We have recorded a valuation allow ance on these net deferred tax assets. In
assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will be realized.
Realization of the deferred tax assets, net of liabilities, is principally dependent upon the achievement of projected future taxable income.

We record contingent liabilities resulting from asserted and unasserted claims against us when it is probable that a liability has been incurred and the
amount of the loss is reasonably estimable. We disclose contingent liabilities when there is a reasonable possibility that the ultimate loss will exceed the
recorded liability. Estimating probable losses requires analysis of multiple factors, in some cases including judgments about the potential actions of third party
claimants and courts. Therefore, actual losses in any future period are inherently uncertain.
 

Our cash and cash equivalents and marketable securities include cash, commercial paper, corporate debt securities, municipal securities, and
certificates of deposit. Cash and cash equivalents also include credit and debit card receivables due from financial intermediaries. Our cash and cash
equivalents and marketable securities are for working capital purposes. We do not enter into investments for trading or speculative purposes. Due to the short-
term nature of these investments, we believe that we do not have any material exposure to changes in the fair value of our cash and cash equivalents and
marketable securities as a result of changes in interest rates. Declines in interest rates, however, would reduce future investment income.

We bill our customers exclusively in U.S. dollars and therefore our revenue is not subject to foreign currency risk. However, certain of our operating
expenses are incurred in Argentina and are denominated in Argentine pesos and therefore are subject to fluctuations due to changes in foreign currency exchange
rates. Due to the minimal size of our operations in Argentina, we do not believe such changes in foreign currency exchange rates would have a material impact
on our results of operations.
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