Aarons 2014 Annual Report Download - page 68

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the significant start-up expenses associated with the HomeSmart stores, there could be a change in the valuation of the
HomeSmart reporting unit that may result in the recognition of an impairment loss in future periods.
No new indications of impairment existed during the fourth quarter of 2014. As a result, no impairment testing was updated as
of December 31, 2014.
Other Intangibles
Other intangibles include customer relationships, non-compete agreements and franchise development rights acquired in
connection with store-based business acquisitions, as well as the identifiable intangible assets acquired as a result of the
Progressive acquisition, which the Company records at the estimated fair value as of the acquisition date. The customer
relationship intangible asset is amortized on a straight-line basis over a two-year estimated useful life. The non-compete
intangible asset is amortized on a straight-line basis over a three-year useful life. Acquired franchise development rights are
amortized on a straight-line basis over the unexpired life of the franchisee’s ten year area development agreement. As more
fully described in Note 2 to these consolidated financial statements, the Company amortizes the definite-lived intangible assets
acquired as a result of the Progressive acquisition on a straight-line basis over periods ranging from one to three years for
customer lease contracts and internal use software and ten to 12 years for technology and merchant relationships.
Indefinite-lived intangible assets represent the value of trade names and trademarks acquired as part of the Progressive
acquisition. At the date of acquisition, the Company determined that no legal, regulatory, contractual, competitive, economic or
other factors limit the useful life of the trade name and trademark intangible asset and, therefore, the useful life is considered
indefinite. Indefinite-lived intangible assets are not amortized but are subject to an impairment test annually and when events or
circumstances indicate that impairment may have occurred. Upon the acquisition of Progressive, the Company selected October
1 as the annual impairment assessment date for goodwill of the Progressive reporting unit and its indefinite-lived intangible
assets. The Company performs the impairment test for its indefinite-lived intangible assets by comparing the asset’s fair value
to its carrying value. The Company estimates the fair value based on projected discounted future cash flows under a relief from
royalty type method. An impairment charge is recognized if the asset’s estimated fair value is less than its carrying value.
The Company completed its indefinite-lived intangible asset impairment test as of October 1, 2014 and determined that no
impairment had occurred.
Insurance Reserves
Estimated insurance reserves are accrued primarily for group health, general liability, automobile liability and workers
compensation benefits provided to the Company’s employees. Estimates for these insurance reserves are made based on actual
reported but unpaid claims and actuarial analysis of the projected claims run off for both reported and incurred but not reported
claims.
Asset Retirement Obligations
The Company accrues for asset retirement obligations, which relate to expected costs to remove exterior signage, in the period
in which the obligations are incurred. These costs are accrued at estimated fair value. When the related liability is initially
recorded, the Company capitalizes the cost by increasing the carrying amount of the related long-lived asset. Over time, the
liability is accreted to its settlement value and the capitalized cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, the Company recognizes a gain or loss for any differences between the settlement amount and the
liability recorded. Asset retirement obligations amounted to approximately $2.7 million and $2.4 million as of December 31,
2014 and 2013, respectively.
Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss by component for the year ended December 31, 2014 are as follows:
(In Thousands) Foreign Currency Total
Balance at January 1, 2014 $ (64) $ (64)
Other comprehensive loss (26)(26)
Balance at December 31, 2014 $ (90) $ (90)
There were no reclassifications out of accumulated other comprehensive loss for the year ended December 31, 2014.