Tucows 2013 Annual Report Download - page 87

The Company adopted Accounting Standards Update No. 2013-02, Comprehensive Income (Topic 220):
“Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income.” (“ASU 2013-02”), effective
January 1, 2013. ASU 2013-02 was applied prospectively, which requires expanded disclosures for amounts reclassified out
of accumulated other comprehensive income by component. The guidance requires the presentation of amounts reclassified
out of accumulated other comprehensive income by the respective line items of net income but only if the amount
reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For
other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, a cross-reference to
other disclosures that provide additional detail about those amounts is required. The adoption of ASU 2013-02 did not
materially impact the Company’s consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted
On July 18, 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss
Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11, which is effective
prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013, is expected to
reduce diversity in practice by providing guidance on the presentation of unrecognized tax benefits and will better reflect the
manner in which an entity would settle at the reporting date any additional income taxes that would result from the
disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. We
are currently evaluating the impact of our pending adoption of ASU 2013-11 on our Consolidated Financial Statements.
3. Business acquisitions:
a. Goodwill:
Goodwill represents the excess of purchase price over the fair value of tangible or identifiable intangible assets
acquired and liabilities assumed in our acquisitions. Intangible assets consist of acquired technology, brand, customer
relationships, non-competition agreements, surname domain names and direct navigation domain names. Intangible assets,
comprising technology, brand, customer relationships and non-competition arrangements related to the acquisition of
Boardtown Corporation in April 2004, the acquisition of the Hosted Messaging Business of Critical Path, Inc. in January
2006, the acquisition of Mailbank.com Inc. in June 2006, the acquisition of Innerwise, Inc. in July 2007 and the acquisition
of EPAG Domainservices GmbH in August 2011, are being amortized on a straight-line basis over periods of two to seven
years.
The Company has other finite life intangible assets consisting of patented and non-patented technologies. These
intangible assets are amortized over their expected economic lives. The lives are determined based upon the expected use of
the asset, the estimated average life of the replacement parts of the reporting unit’s products, the stability of the industry,
expected changes in and replacement value of distribution networks and other factors deemed appropriate.
Goodwill consists of the following:
Boardtown
Corporation
Hosted
Messaging
Assets of
Critical
Path
Innerwise
Inc.
Mailbank.com
Inc.
EPAG
Domainservices
GmbH
Total
Balances, December 31, 2011
$
2,044,847
$
4,072,297
$
5,801,040
$
6,072,623
$
882,320
$
18,873,127
Balances, December 31, 2012
$
2,044,847
$
4,072,297
$
5,801,040
$
6,072,623
$
882,320
$
18,873,127
Balances, December 31, 2013
$
2,044,847
$
4,072,297
$
5,801,040
$
6,072,623
$
882,320
$
18,873,127
The Company accounts for goodwill in accordance with FASB’s authoritative guidance, which requires that
goodwill and certain intangible assets are not amortized, but are subject to an annual impairment test. The Company
completes its goodwill and certain intangible assets impairment test on an annual basis, during the fourth quarter of its fiscal
year, or more frequently, if changes in facts and circumstances indicate that impairment in the value of goodwill and certain
intangible assets recorded on its balance sheet may exist. The Company determined the estimated fair value for its reporting
unit using the market approach that is based on the publicly traded common shares of the Company to estimate fair value.
The carrying value was greater than the fair value, therefore no impairment exists and the second step was not performed.
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