Vistaprint 2012 Annual Report Download - page 44

40
Goodwill, Indefinite-Lived Intangible Assets, and Other Long-Lived Assets. We evaluate goodwill and
indefinite-lived intangible assets for impairment annually or more frequently when an event occurs or circumstances
change that indicate that the carrying value may not be recoverable. As of our annual testing date, January 1, we
test goodwill for impairment. In the third quarter of fiscal 2012, we early adopted the new accounting guidance that
simplifies how an entity tests goodwill for impairment. It provides an option to first assess qualitative factors to
determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
Some factors considered include the timing of the most recent fair value assessment (approximately $136.3 million
of the goodwill as of June 30, 2012 was the result of acquisitions during the second quarter of fiscal 2012), the
operating results of the reporting units as compared to forecast, an assessment of our overall market capitalization
as compared to our consolidated net assets, and the consideration of market or economic events that could be
indicative of impairment. In addition to the specific factors mentioned above, we assess the following individual
factors on an ongoing basis such as:
• A significant adverse change in legal factors or the business climate
• An adverse action or assessment by a regulator
• Unanticipated competition
• A loss of key personnel
• A more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold
or otherwise disposed of
We analyze these qualitative factors to determine whether it is necessary to perform the two-step
quantitative goodwill impairment test. Under the new guidance, this quantitative test is required only if we conclude
that it is more likely than not that a reporting unit’s fair value is less than its carrying amount. After performing the
annual goodwill impairment qualitative analysis during the third quarter of fiscal 2012, we determined it was not
necessary to perform the two-step goodwill impairment test.
Analyzing the risk of potential impairment is subjective and if the economic and market conditions of our
reporting units detrimentally change in the future, a two-step goodwill impairment step may be required, which could
result in an impairment charge. We considered any changes to the reporting units since our annual assessment and
have concluded that as of June 30, 2012 no impairment indicators exist for any of our reporting units.
We are required to test definite lived long-lived assets, which include, among other items, customer
relationships, developed technology, property, and equipment, when indicators of impairment are present. For
purposes of this test, long-lived assets are grouped with other assets and liabilities at the lowest level for which
identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The test for
recoverability compares the undiscounted future cash flows of the long-lived asset group to its carrying value. If the
carrying values of the long-lived asset group exceed the future cash flows, the assets are considered to be
potentially impaired. The next step in the impairment measurement process is to determine the fair value of the
individual net assets within the long-lived asset group. If the aggregate fair values of the individual net assets of the
group are less than the carrying values, an impairment charge is recorded equal to the excess of the aggregate
carrying value of the group over the aggregate fair value. The loss is allocated to each asset within the group based
on their relative carrying values, with no asset reduced below its fair value. The identification and evaluation of a
potential impairment requires judgment and is subject to change if events or circumstances pertaining to our
business change. No events have occurred that would require an impairment assessment of our long-lived asset
groups during the year ended June 30, 2012.
Litigation and Contingencies. We are subject to various loss contingencies arising in the ordinary course of
business. We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our
ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency
is accrued when it is probable that an asset has been impaired or a liability has been incurred and the amount of
loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether
such accruals should be adjusted.