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Table of Contents
assumptions could materially affect the determination of fair value for each reporting unit which could trigger impairment or impact the amount
of the impairment.
Long
-lived assets
For noncurrent assets such as property and equipment and definite-
lived intangible assets, we perform tests of impairment when certain
events or changes in circumstances indicate that the carrying amount may not be recoverable. Our tests involve critical estimates reflecting
management's best assumptions and estimates related to, among other factors, subscriber additions, churn, prices, marketing spending, operating
costs and capital spending. Significant judgment is involved in estimating these factors, and they include inherent uncertainties. Management
periodically evaluates and updates the estimates based on the conditions that influence these factors. The variability of these factors depends on a
number of conditions, including uncertainty about future events, and thus our accounting estimates may change from period to period. If other
assumptions and estimates had been used in the current period, the balances for noncurrent assets could have been materially impacted.
Furthermore, if management uses different assumptions or if different conditions occur in future periods, future operating results could be
materially impacted.
Business Combinations
We recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values. Goodwill as of
the acquisition date is measured as the excess of consideration transferred and the net of the acquisition date fair values of the assets acquired
and the liabilities assumed. While we use our best estimates and assumptions as a part of the purchase price allocation process to accurately
value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result,
during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and
liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are
recorded to our consolidated statements of operations.
Accounting for business combinations requires our management to make significant estimates and assumptions, especially at the acquisition
date with respect to intangible assets, obligations assumed and pre-
acquisition contingencies. Although we believe the assumptions and estimates
we have made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from
the management of the acquired companies and are inherently uncertain. Examples of critical estimates in valuing certain of the intangible assets
include, but are not limited to, future expected cash flows from customer contracts and acquired developed technologies, the acquired company's
brand and competitive position, as well as assumptions about the period of time the acquired brand will continue to be used in the combined
company's product portfolio and discount rates. Unanticipated events and circumstances may occur that may affect the accuracy or validity of
such assumptions, estimates or actual results.
In addition, uncertain tax positions and tax related valuation allowances assumed in connection with a business combination are initially
estimated as of the acquisition date and we reevaluate these items quarterly with any adjustments to our preliminary estimates being recorded to
goodwill provided that we are within the measurement period and we continue to collect information in order to determine their estimated
values. Subsequent to the measurement period or our final determination of the uncertain tax positions estimated value or tax related valuation
allowances, changes to these uncertain tax positions and tax related valuation allowances will affect our provision for income taxes in our
consolidated statement of operations and could have a material impact on our results of operations and financial position.
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