Enom 2010 Annual Report Download - page 112

Table of Contents
Demand Media, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(In thousands, except per share amounts)
2. Summary of Significant Accounting Policies (Continued)
appropriate useful life by performing an analysis of expected cash flows based on historical experience with domain names of similar quality and value.
In order to maintain the rights to each undeveloped website acquired, the Company pays periodic renewal registration fees, which generally cover a
minimum period of twelve months. The Company records renewal registration fees of website name intangible assets in deferred registration costs and
amortizes the costs over the renewal registration period, which is included in service costs.
Intangibles—Media Content
The Company capitalizes the direct costs incurred to acquire its media content that is determined to embody a probable future economic benefit. Costs
are recognized as finite lived intangible assets based on their acquisition cost to the Company. Direct content costs primarily represent amounts paid to
unrelated third parties for completed content units, and to a lesser extent, specifically identifiable internal direct labor costs incurred to enhance the value of
specific content units acquired prior to their publication. Internal costs not directly attributable to the enhancement of an individual content unit acquired are
expensed as incurred. All costs incurred to deploy and publish content are expensed as incurred, including the costs incurred for the ongoing maintenance of
the Company's websites in which the Company's content is deployed.
Capitalized media content is amortized on a straight-line basis over five years, representing the Company's estimate of the pattern that the underlying
economic benefits are expected to be realized and based on its estimates of the projected cash flows from advertising revenue expected to be generated by the
deployment of its content. These estimates are based on the Company's plans and projections, comparison of the economic returns generated by its content of
comparable quality and an analysis of historical cash flows generated by that content to date. Amortization of media content is included in amortization of
intangible assets in the accompanying statement of operations and the acquisition costs are included in purchases of intangible assets within cash flows from
investing activities in the Consolidated Statements of Cash Flows.
Intangibles—Acquired in Business Combinations
The Company performs valuations on each acquisition accounted for as a business combination and allocates the purchase price of each acquired
business to its respective net tangible and intangible assets. Acquired intangible assets include: trade names, non-compete agreements, owned website names,
customer relationships, technology, media content, and content publisher relationships. The Company determines the appropriate useful life by performing an
analysis of expected cash flows based on historical experience of the acquired businesses. Intangible assets are generally amortized over their estimated useful
lives using the straight line method which approximates the pattern in which the economic benefits are consumed.
Goodwill
Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets. The Company tests goodwill for impairment
annually during the fourth quarter of its fiscal year or when events or circumstances change that would indicate that goodwill might be impaired. Events or
circumstances which could trigger an impairment review include, but are not limited to a
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