Enom 2015 Annual Report Download - page 45

43
value, then a second step is performed to measure the amount of the impairment loss, if any. The amount of the
impairment loss is the excess of the carrying amount of the goodwill over its implied fair value. The estimate of implied
fair value of goodwill is primarily based on an estimate of the discounted cash flows expected to result from that
reporting unit, but may require valuations of certain internally generated and unrecognized intangible assets such as our
software, technology, patents and trademarks.
For the year ended December 31, 2014, due to unexpected revenue declines attributable to lower traffic and
monetization yield on certain of our content and media websites, we lowered our future cash flow expectations. As a
result of the decline in our cash flow forecast as well as a sustained decline in our market capitalization which remained
at a level below the book value of our net assets for an extended period of time, we performed an interim assessment of
impairment of the goodwill in our content and media reporting unit in the third quarter of 2014. Based on our analyses,
we determined that the implied fair value of goodwill was substantially lower than the carrying value of goodwill for the
content and media reporting unit and as a result, we determined that the implied fair value of the goodwill in the content
and media reporting unit was zero. Accordingly, we recorded $232.3 million for the goodwill impairment charge in
2014.
For the year ended December 31, 2015, we performed our annual goodwill impairment test in the fourth quarter of
the year, consistent with our existing accounting policy, and we determined that there was no impairment charge for the
year ended December 31, 2015. As of December 31, 2015, there was $10.4 million of goodwill recorded in our
marketplaces reporting unit. We may be required to record goodwill impairment charges in future periods.
Intangible Assets—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. All costs
incurred to deploy and publish content are expensed as incurred, including the costs incurred for the ongoing
maintenance of websites on which our content resides. We generally acquire content when our internal systems and
processes provide reasonable assurance that, given predicted consumer and advertiser demand relative to our
predetermined cost to acquire the content, the content unit will generate revenue over its useful life that exceeds the cost
of acquisition. In determining whether content embodies a probable future economic benefit required for asset
capitalization, we make judgments and estimates including the forecasted number of visits and the advertising rates that
the content will generate. These estimates and judgments take into consideration various inherent uncertainties
including, but not limited to, total expected visits over the content’s useful life; the fact that our content creation and
distribution model is evolving and may be impacted by competition and technological advancements; our ability to
expand existing and enter into new distribution channels and applications for our content; and whether we will be able to
generate similar economic returns from content in the future. Management has reviewed, and intends to regularly review,
the operating performance of content in determining probable future economic benefits of our content.
Capitalized media content is amortized on a straight-line basis over its useful life, which is typically five years,
representing our estimate of when the underlying economic benefits are expected to be realized and based on our
estimates of the projected cash flows from advertising revenue expected to be generated by the deployment of such
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.
We continue to perform 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 units
from our content library, resulting in $3.4 million, $7.7 million and $3.1 million of related accelerated amortization
expense in the years ended December 31, 2015, 2014 and 2013, respectively.
Intangible Assets—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, artist