Rosetta Stone 2011 Annual Report Download - page 104

Table of Contents
ROSETTA STONE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. GOODWILL
The value of goodwill is primarily derived from the acquisition of Rosetta Stone Ltd. (formerly known as Fairfield & Sons, Ltd.) in January 2006 and the
acquisition of certain assets of SGLC in November 2009. The Company tests goodwill for impairment annually on June 30 of each year at the reporting unit
level using a fair value approach, in accordance with the provisions of Accounting Standards Codification topic 350, Intangibles—Goodwill and Other ("ASC
350") or more frequently, if impairment indicators arise. Subsequent to performing the annual test as of June 30, 2011, such indication occurred during the
fourth quarter of 2011 when the fair value of the Company's publicly traded common stock dropped; however, after performing Step 1 of the impairment test
under ASC 350, no impairment was identified as the fair value was greater than the book value of each reporting unit. The Company will continue to review
indicators and it is possible an impairment charge may need to be recorded if trends do not reverse. Beginning in 2011, the Company began reporting its
results in two reportable segments, which resulted in two reporting units for goodwill impairment purposes—Consumer and Institutional. The Company's
annual testing resulted in no impairments of goodwill since the dates of acquisition.
The following table represents the balance and changes in goodwill for the years ended December 31, 2011 and 2010 (in thousands):
Consumer
Operating
Segment
Institutional
Operating
Segment Total
Balance as of January 1, 2010 15,669 19,150 34,819
No acquisition activity — — —
Balance as of December 31, 2010 15,669 19,150 34,819
No acquisition activity — — —
Balance as of December 31, 2011 15,669 19,150 34,819
Effect of change in foreign currency rate 10 12 22
Balance as of December 31, 2011 15,679 19,162 34,841
7. INTANGIBLE ASSETS
Intangible assets consisted of the following items as of the dates indicated (in thousands):
December 31, 2011 December 31, 2010
Gross
Carrying
Amount Accumulated Amortization
Net
Carrying
Amount
Gross
Carrying
Amount Accumulated Amortization
Net
Carrying
Amount
Trade name / trademark $ 10,608 $ — $ 10,608 $ 10,607 $ — $ 10,607
Core technology 2,453 (2,453) — 2,453 (2,453) —
Customer relationships 10,842 (10,842) — 10,844 (10,800) 44
Website 12 (12) — 12 (12) —
Patents 300 (43) 257 300 (3) 297
Total $ 24,215 $ (13,350)$ 10,865 $ 24,216 $ (13,268)$ 10,948
The Company recorded intangible assets of $23.8 million, associated with the acquisition of Rosetta Stone Ltd. in January 2006, and $0.1 million with
the acquisition of certain assets of SGLC in November 2009. During 2010, the Company recorded the purchase of two patents associated with the
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