Go Daddy 2015 Annual Report Download - page 79

Table of Contents
our single reporting unit’s fair value is not greater than its carrying value. We may elect to perform the two-step impairment test without considering such
qualitative factors.
Our qualitative analyses during 2015 , 2014 and 2013 did not indicate any impairment of our goodwill and indefinite-lived intangible assets, and accordingly,
no impairment was recorded. As of December 31, 2015 , we believe such assets are recoverable; however, there can be no assurances these assets will not be
impaired in future periods. Any future impairment charges could adversely impact our consolidated results of operations.
See Notes 2 and 4 to our consolidated financial statements for additional information regarding goodwill and indefinite-lived intangible assets.
Income Taxes
We are subject to U.S. federal and state income taxes. In addition, we may be subject to taxes in the foreign jurisdictions in which we operate. We are a
controlling member in Desert Newco, which has been, and will continue to be, treated as a partnership for U.S. income tax purposes. Under these provisions,
Desert Newco is considered a pass-through entity and generally does not pay income taxes on its taxable income in most jurisdictions. Instead, Desert Newco's
members, of which we are one, are liable for U.S. federal and state income taxes based on their taxable income. Desert Newco is liable for income taxes in certain
foreign jurisdictions, in those states not recognizing its pass-through status and for certain subsidiaries not taxed as pass-through entities. We have acquired the
outstanding stock of various entities taxed as corporations, which are now wholly-owned by us or our subsidiaries and are treated as a consolidated group for
federal income tax purposes. Where required or allowed, these subsidiaries also file as a consolidated group for state income tax purposes.
We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events included in the financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences
between the financial statements and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to
reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period in which the enactment date occurs.
We recognize deferred tax assets to the extent we believe these assets are more-likely-than-not to be realized. In making such a determination, we consider all
available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning
strategies and recent results of operations.
We recognize tax benefits from uncertain tax positions only if it is more-likely-than-not the tax position will be sustained on examination by the taxing
authorities based on the technical merits of the position. The tax benefits recognized from such positions are measured based on the largest benefit having a greater
than 50 % likelihood of being realized upon ultimate settlement.
See Notes 2 and 12 to our consolidated financial statements for additional information regarding income taxes.
Payable to Related Parties Pursuant to the TRAs
Concurrent with the completion of the IPO, we became a party to five TRAs. Under four of the TRAs, we generally will be required to pay to each
Reorganization Party approximately 85% of the amount of calculated tax savings, if any, we are deemed to realize as a result of (1) any existing tax attributes of
LLC Units acquired in the applicable Investor Corp Merger, (2) NOLs available as a result of the applicable Investor Corp Merger and (3) tax benefits related to
imputed interest. The other TRA requires us to pay our pre-IPO owners approximately 85% of the amount of the calculated tax savings, if any, we are deemed to
realize from exchanges of LLC Units (together with the corresponding shares of Class B common stock) for Class A common stock.
When LLC Units are exchanged, we receive certain tax attributes, including the original basis adjustments (the OBAs) created from the original acquisition
of the LLC Units plus any anticipated basis adjustments. The OBAs entitle us to the depreciation and amortization previously allocable to the original owner of
such units. The anticipated basis adjustments will increase, for tax purposes, our depreciation and amortization deductions. To the extent these deductions are used
to reduce our taxable income, thereby resulting in actual tax savings, we will be required to pay the original owners approximately 85% of such
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