Vistaprint 2013 Annual Report Download - page 39

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capitalized software and website development costs; however, in fiscal 2013 we did abandon $0.5 million of
previously capitalized technology.
Business Combinations. Amounts paid for acquisitions are allocated to the tangible and intangible assets
acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The fair value of
identifiable intangible assets is based on detailed cash flow valuations that use information and assumptions
provided by management. The valuations are dependent upon a myriad of factors including historical financial
results, estimated customer renewal rates, projected operating costs and discount rates. We estimate the fair value
of contingent consideration at the time of the acquisition using all pertinent information known to us at the time to
assess the probability of payment of contingent amounts. We allocate any excess purchase price over the fair value
of the net tangible and intangible assets acquired and liabilities assumed to goodwill. The assumptions used in our
valuations for the acquisition of Webs and Albumprinter during fiscal 2012 may differ materially from actual results
depending on performance of the acquired businesses and other factors. While we believe the assumptions used
were appropriate, different assumptions in the allocation of the purchase price to either identifiable intangible assets
or goodwill could have a material impact on the timing and extent of impact on our statements of operations.
Goodwill is assigned to reporting units as of the date of the related acquisition. If goodwill is assigned to
more than one reporting unit, we utilize a method that is consistent with the manner in which the amount of goodwill
in a business combination is determined. Costs related to the acquisition of a business are expensed as incurred.
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. In the third quarter of fiscal 2012, we early
adopted 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. For our annual impairment test in fiscal 2013, we considered those factors
including the timing of the most recent fair value assessment (approximately $140.9 million of the goodwill as of
June 30, 2013 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; and
• 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 elected to perform a quantitative goodwill impairment test for our January 1, 2013 analysis, our annual
testing date, in order to establish an updated baseline fair value for each of our reporting units as the majority of our
goodwill was established in the second quarter of fiscal 2012 immediately preceding our prior year annual goodwill
impairment test.
Under the quantitative approach, we estimate the fair values of our reporting units using a discounted cash
flow methodology. The discounted cash flows are based on our strategic plans and best estimates of revenue
growth and operating profit by each reporting unit. Our annual analysis requires significant judgment, including the
identification and aggregation of reporting units, discount rate and perpetual growth rate assumptions, and the
amount and timing of expected future cash flows. Our annual goodwill impairment test by reporting unit as of
January 1, 2013 determined that the estimated fair value of each reporting unit sufficiently exceeds its carrying
value and thus no further evaluation of impairment was necessary. While we believe our assumptions are
reasonable, actual results could differ from our projections. We considered any changes to the reporting units since
our annual assessment and have concluded that as of June 30, 2013 no impairment indicators exist for any of our
reporting units.