Enom 2013 Annual Report Download - page 90

Intangibles
—Media Content
We capitalize the direct costs incurred to acquire our 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 us. 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 our websites in which our content is published.
Capitalized media content is amortized on a straight-line basis over its useful life, which is typically five years, representing our 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 our content. These estimates are based on our plans and projections,
comparison of the economic returns generated by our content with 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
Consolidated 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
We perform valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination and allocate
the purchase price of each acquired business to
our 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. We
determine the appropriate useful life by performing an analysis of expected cash flows based on historical experience of the acquired businesses.
Intangible assets are amortized over their estimated useful lives using the straight-line method which approximates the pattern in which the
economic benefits are consumed.
Long-lived Assets
We evaluate the recoverability of our 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. Such trigger events or changes in circumstances may include: 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 change in legal factors or in the business climate, including those resulting from technology advancements in the
industry, the impact of competition or other factors that could affect the value of a long-lived asset, 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 demonstrate
continuing losses associated with the use of a 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. If
events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable and the expected undiscounted
future cash flows attributable to the asset group are less than the carrying amount of the asset group, an impairment loss equal to the excess of
the asset’s carrying value over its fair value is recorded. Fair value is determined based upon estimated discounted future cash flows. Through
December 31, 2013, we have identified no such impairment loss. Assets to be disposed of would be separately presented on the balance sheets
and reported at the lower of their carrying amount or fair value less costs to sell, and would no longer be depreciated or amortized.
Google, the largest provider of search engine referrals to the majority of our websites, regularly deploys changes to our search engine
algorithms, some of which have led us to experience fluctuations in the total number of Google search referrals to our owned and operated and
network of customer websites. In 2011, the overall impact of these changes on our owned and operated websites was negative primarily due to a
decline in traffic to eHow.com, our largest website. Beginning in response to changes in search engine algorithms since 2011, we have
performed evaluations of our existing content library to identify potential improvements in our content creation and distribution platform. As a
result of these evaluations, we elected to remove certain content assets from service, resulting in $2.4 million, $2.1 million and $5.9 million of
related accelerated amortization expense in 2013, 2012 and 2011, respectively. Any further discretionary actions may result in additional
accelerated amortization in the periods the actions occur.
Goodwill
Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets. Goodwill is tested for
impairment annually during the fourth quarter of our fiscal year or when events or circumstances change that would indicate that goodwill might
be impaired. Events or circumstances that could trigger an impairment review include , but are not limited to, a
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