TeleNav 2015 Annual Report Download - page 95

Table of Contents TELENAV, INC.
Notes to Consolidated Financial Statements—(Continued)
amount, a total of $1.8 million are accounted for as cost-basis investments, as we own less than 20% of the voting securities and do not have the
ability to exercise significant influence over operating and financial policies of the entities. Our investments are in entities that are not publicly
traded and, therefore, no established market for the securities exists. Our cost-method investments are carried at historical cost in our
consolidated balance sheets and measured at fair value on a nonrecurring basis when indicators of impairment exist. If we believe that the
carrying value of the cost basis investments is in excess of estimated fair value, our policy is to record an impairment charge to adjust the
carrying value to estimated fair value, when the impairment is deemed other-than-temporary. We regularly evaluate the carrying value of these
cost-method investments for impairment. We record realized gains or losses on the sale or impairment of cost method investments in other
income, net.
In addition to these cost-basis investments, in April 2015, we entered into an agreement to spin off a product line developed by our
Shanghai, China team, including certain assets and technology as well as the transfer of seven employees, and we agreed to invest $1.0 million
in
the form of a convertible note. We are the primary investor; however, we do not have significant influence over the operations of the business.
Accordingly, we record the monthly net change in operating results against the carrying value of the convertible note recorded in long-term
investments on our consolidated balance sheet. Fiscal 2015 includes three months of operating results for the investee entity. The entity's success
is contingent upon its ability to generate revenue and raise additional capital. Based upon the early stage of this company, its lack of success to
date in each of these endeavors, and China's recent unfavorable macroeconomic conditions making the raising of additional capital difficult, we
recorded an impairment charge of $820,000 to write down the carrying value of the convertible note to zero as of June 30, 2015.
In June 2015, we also entered into an agreement to spin off a product line developed by our Xian, China team, including certain assets and
technology as well as the transfer of 12 employees, and we agreed to invest $800,000 in the form of a convertible note. We are the primary
investor; however, we do not have significant influence over the operations of the business. Accordingly, we record the monthly net change in
operating results against the carrying value of the convertible note recorded in long-term investments on our consolidated balance sheet. Fiscal
2015 includes one month of operating results for the investee entity. The entity's success is contingent upon its ability to generate revenue and
raise additional capital. As of June 30, 2015, our investment balance was $744,000 .
Including the impairment in the Shanghai, China spin off above, we recorded impairment charges of $1.3 million , $250,000 and $335,000
on certain non-marketable equity investments in fiscal 2015 , 2014 and 2013 , respectively.
Also included in other income, net in fiscal 2014 is a $795,000 gain from the sale in December 2013 of an investment in a privately-held
company.
Long-lived assets
We evaluate our long-lived assets, including intangible assets, for impairment whenever events or changes in circumstances indicate the
carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the
future undiscounted cash flows the assets are expected to generate. If long-lived assets are considered to be impaired, the impairment to be
recognized equals the amount by which the carrying value of the asset exceeds its fair value.
Goodwill
Goodwill represents the excess of the aggregate purchase price paid over the fair value of the net assets acquired. Goodwill is not
amortized and is tested for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value may not
be recoverable. These tests are based on our operating segment and reporting unit structure. We first assess qualitative factors to determine
whether it is necessary to perform the two-step quantitative goodwill impairment test. We are not required to calculate the fair value of our
reporting units unless we determine, based on a qualitative assessment, that it is more-likely-than-not that the fair value is less than our carrying
amount. If we determine it is more likely than not that the fair value of the reporting unit is less than its carrying value, we perform a two-step
quantitative goodwill impairment test. The first step of the impairment test involves comparing the fair value of the reporting unit to its net book
value, including goodwill. If the net book value exceeds its fair value, then we would perform the second step of the goodwill impairment test to
determine the amount of the impairment loss, if any. In assessing the fair value of our reporting units, we make assumptions regarding our
estimated future cash flows, long-term growth rates, timing over which the cash flows will occur and, amongst other factors, the weighted
average cost of capital. If our estimates or related assumptions change in the future, or if our net book value were to exceed our market
capitalization, we may be required to record impairment loss related to our goodwill. We have not recognized any impairment of goodwill in the
three year period ended June 30, 2015 . As of June 30, 2015 , we had goodwill of $31.3 million.
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