Vistaprint 2013 Annual Report Download - page 61

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Long-Lived Assets
Long-lived assets with a definite life are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets might not be recoverable. Conditions that would
necessitate an impairment assessment include a significant decline in the observable market value of an asset, a
significant change in the extent or manner in which an asset is used, or any other significant adverse change that
would indicate that the carrying amount of an asset or group of assets may not be recoverable.
For long-lived assets used in operations, impairment losses are only recorded if the asset’s carrying
amount is not recoverable through its undiscounted, probability-weighted future cash flows. We measure the
impairment loss based on the difference between the carrying amount and estimated fair value. Long-lived assets
are considered held for sale when certain criteria are met, including when management has committed to a plan to
sell the asset, the asset is available for sale in its immediate condition, and the sale is probable within one year of
the reporting date. Assets held for sale are reported at the lower of cost or fair value less costs to sell. We did not
have any assets held for sale at June 30, 2013 or 2012.
For the fiscal year ended, June 30, 2013, 2012 and 2011 we recorded abandonment charges for long-lived
assets, inclusive of capitalized software, of $1,529, $0, and $252, respectively.
Business Combinations
We assign the value of the consideration transferred to acquire a business to the tangible and intangible
assets acquired and liabilities assumed on the basis of their fair values at the date of acquisition. We assess the fair
value of assets, including intangible assets, using a variety of methods and each asset is measured at fair value
from the perspective of a market participant. The method used to estimate the fair values of intangible assets
incorporates significant assumptions regarding the estimates a market participant would make in order to evaluate
an asset, including a market participant’s use of the asset and the appropriate discount rates for a market
participant. Assets recorded from the perspective of a market participant that are determined to not have economic
use for us are expensed immediately. Any excess purchase price over the fair value of the net tangible and
intangible assets acquired is allocated to goodwill. Transaction costs and restructuring costs associated with a
business combination are expensed as incurred.
Goodwill
Goodwill is evaluated for impairment on an annual basis during the fiscal third quarter or more frequently
when an event occurs or circumstances change that indicate that the carrying value may not be recoverable.
Goodwill is considered to be impaired when the net book value of a reporting unit exceeds its estimated fair value.
The evaluation of goodwill for impairment is performed at a level referred to as a reporting unit. A reporting unit is
either the “operating segment level” or one level below, which is referred to as a “component.” The level at which
the impairment test is performed requires an assessment as to whether the operations below the operating
segment should be aggregated as one reporting unit due to their similarity or reviewed individually. In 2012, we
early adopted the accounting guidance that allows entities to perform a qualitative assessment of goodwill
impairment. In fiscal 2013, we elected to perform the quantitative impairment test for our January 1, 2013 analysis
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 analysis requires the exercise of significant judgment,
including the identification reporting units and the consideration of aggregation, assumptions about appropriate
discount rates, perpetual growth rates, 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. There have been
no indications of impairment that would require an updated analysis as of June 30, 2013.