Cash America 2014 Annual Report Download - page 104

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
89
reporting unit that the Company had on that date exceeded their respective carrying values, and, as a result, no
impairment existed at that date.
The Company’s sale of its Mexico-based pawn operations in August 2014 was considered a triggering event
for purposes of goodwill assessment. Following the sale, the Company tested the goodwill remaining in the retail
services reporting unit, and determined that the fair value exceeded its carrying value.
The Enova Spin-off in November 2014 was considered a triggering event for purposes of goodwill
assessment. Prior to the Enova Spin-off, each of the Company’s two segments, retail services and e-commerce, were
considered reporting units for purposes of the goodwill assessment. Enova comprised the e-commerce segment and
was considered the e-commerce reporting unit. Following the Enova Spin-off, the Company reviewed its segment
structure and determined that the retail services segment was the Company’s only segment, and as such, the only
reporting unit for goodwill assessment. Following the Enova Spin-off and as of December 31, 2014, the estimated
fair value of the retail services reporting unit was re-calculated to incorporate changes in strategy, observed business
trends and outlook. The estimated fair value of the retail services reporting unit declined since the June 30, 2014
annual assessment, but it continued to exceed its underlying carrying value. However, the excess fair value over the
carrying value had been reduced to approximately 3% at December 31, 2014.
As part of the goodwill assessment, the Company also considers market capitalization, which is the
observable market value of the Company based on the quoted market prices of the Company's common stock. The
Company compares the market capitalization to its carrying value of equity. Following the Enova Spin-off and as of
December 31, 2014, the Company’s market capitalization was observed to be lower than the carrying value of
equity. The Company believes the observable market value at December 31, 2014 is not a reliable indicator of the
Company’s fair value, due to the very short time frame since the date of the Enova Spin-off, a likely transition of a
significant number of investors occurring due to the magnitude of the event, and the disruption of the Company’s
share price following the event. Management believes this disruption is temporary but acknowledges the need to
monitor and re-evaluate any future discrepancies between these values and consider the implications for an
impairment of goodwill in future periods.
The Company is considered to be at risk for a future impairment of its goodwill in the event of a decline in
general economic, market or business conditions or any significant unfavorable changes in the Company's
forecasted revenue, expenses, cash flows, weighted-average cost of capital and/or market transaction multiples. The
Company will continue to monitor for events and circumstances that could negatively impact the key assumptions
in determining the fair value of the retail services reporting unit.
The Company performed its annual indefinite-lived intangible asset impairment test as of June 30, 2014.
The Company elected to perform a qualitative assessment in accordance with ASU 2012-02, and determined that no
conditions existed that would make it more likely than not that the indefinite-lived intangible assets were impaired.
Therefore, no further quantitative assessment was required. There were no triggering events between the June 30,
2014 assessment and December 31, 2014 that would require a re-assessment of the Company’s indefinite-lived
intangible assets.
As of December 31, 2014, the Company had $487.6 million of goodwill, of which $370.7 million is
expected to be deductible for tax purposes. See Note 9 for additional discussion of the Company’s goodwill activity.