Enom 2012 Annual Report Download - page 59

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decrease by approximately $4 million should the weighted average useful life be reduced by one year. We periodically assess
the useful life of our content, and when adjustments in our estimate of the useful life of content are required, any changes from
prior estimates are accounted for prospectively.
Recoverability of Long-lived Assets
We evaluate the recoverability of our intangible assets, and other long-lived assets with finite useful lives for impairment
when events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. These
trigger events or changes in circumstances include, but are not limited to a significant decrease in the market price of a long-
lived asset, a significant adverse change in the extent or manner in which a long-lived asset is being used, significant adverse
changes in legal factors, including changes that could result from our inability to renew or replace material agreements with
certain of our partners such as Google on favorable terms, significant adverse changes in the business climate including
changes which may result from adverse shifts in technology in our industry and the impact of competition, a significant adverse
deterioration in the amount of revenue or cash flows we expect to generate from an asset group, an accumulation of costs
significantly in excess of the amount originally expected for the acquisition or development of a long-lived asset, current or
future operating or cash flow losses that demonstrates continuing losses associated with the use of our long-lived asset, or a
current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the
end of its previously estimated useful life. We perform impairment testing at the asset group level that represents the lowest
level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. In making this
determination, we consider the specific operating characteristics of the relevant long-lived assets, including (i) the nature of the
direct and any indirect revenues generated by the assets; (ii) the interdependency of the revenues generated by the assets; and
(iii) the nature and extent of any shared costs necessary to operate the assets in their intended use. An impairment test would be
performed when the estimated undiscounted future cash flows expected to result from the use of the asset group is less than its
carrying amount. Impairment is measured by assessing the usefulness of an asset by comparing its carrying value to its fair
value. If an asset is considered impaired, the impairment loss is measured as the amount by which the carrying value of the
asset group exceeds its estimated fair value. Fair value is determined based upon estimated discounted future cash flows. The
key estimates applied when preparing cash flow projections relate to revenues, operating margins, economic life of assets,
overheads, taxation and discount rates. To date, we have not recognized any such impairment loss associated with our long-
lived assets.
Income Taxes
We account for our income taxes using the liability and asset method, which requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or
in our tax returns. In estimating future tax consequences, generally all expected future events other than enactments or changes
in the tax law or rates are considered. Deferred income taxes are recognized for differences between financial reporting and tax
bases of assets and liabilities at the enacted statutory tax rates in effect for the years in which the temporary differences are
expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the
enactment date. We evaluate the realizability of our deferred tax assets and valuation allowances are provided when necessary
to reduce deferred tax assets to the amounts expected to be realized.
We operate in various tax jurisdictions and are subject to audit by various tax authorities. We provide tax contingencies
whenever it is deemed probable that a tax asset has been impaired or a tax liability has been incurred for events such as tax
claims or changes in tax laws. Tax contingencies are based upon their technical merits, and relevant tax law and the specific
facts and circumstances as of each reporting period. Changes in facts and circumstances could result in material changes to the
amounts recorded for such tax contingencies.
We recognize a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in
the consolidated financial statements from such positions are then measured based on the largest benefit that has a greater than
50% likelihood of being realized upon settlement. We recognize interest and penalties accrued related to unrecognized tax
benefits in our income tax (benefit) provision in the accompanying statements of operations.
We calculate our current and deferred tax provision based on estimates and assumptions that could differ from the actual
results reflected in income tax returns filed in subsequent years. Adjustments based on filed returns are recorded when
identified. The amount of income taxes we pay is subject to ongoing audits by federal, state and foreign tax authorities. Our
estimate of the potential outcome of any uncertain tax issue is subject to management's assessment of relevant risks, facts, and
circumstances existing at that time. To the extent that our assessment of such tax positions changes, the change in estimate is
recorded in the period in which the determination is made.