Green Dot 2012 Annual Report Download - page 71

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
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Note 2—Summary of Significant Accounting Policies (continued)
Impairment of Long Lived Assets
We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If the sum of expected undiscounted future cash flows from an
asset is less than the carrying amount of the asset, we recognize an impairment loss. We measure the loss as the
amount by which the carrying amount exceeds its fair value calculated using the present value of estimated net future
cash flows. Included in other general and administrative expenses in our consolidated statements of operations for
the years ended December 31, 2012, 2011 and 2010 were $1.0 million, $0.4 million and $0.4 million, respectively, of
recognized impairment losses on internal-use software.
Goodwill and Intangible Assets
Goodwill is the purchase premium after adjusting for the fair value of net assets acquired. Goodwill is not amortized
but is reviewed for potential impairment on an annual basis, or when events or circumstances indicate a potential
impairment, at the reporting unit level. A reporting unit, as defined under applicable accounting guidance, is a business
segment or one level below a business segment. We first assess qualitative factors to determine whether it is more
likely-than-not (i.e., a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying
value. This step serves as the basis for determining whether it is necessary to perform the two-step quantitative
impairment test. The first step of the quantitative impairment test involves a comparison of the estimated fair value of
each reporting unit to its carrying amount, including goodwill. If the estimated fair value of the reporting unit exceeds
its carrying amount, goodwill of the reporting unit is not impaired; however, if the carrying amount of the reporting unit
exceeds its estimated fair value, then the second step of the quantitative impairment test must be performed. The
second step compares the implied fair value of the reporting unit’s goodwill with its carrying amount to measure the
amount of impairment loss, if any. The implied fair value of goodwill is determined in the same manner as the amount
of goodwill recognized in a business combination. If the carrying amount of the reporting unit’s goodwill exceeds the
implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.
For intangible assets, we recognize an impairment loss if the carrying amount of the intangible asset is not
recoverable and exceeds fair value. The carrying amount of the intangible asset is considered not recoverable if it
exceeds the sum of the undiscounted cash flows expected to result from the use of the asset.
Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives.
Amounts Due to Card Issuing Banks for Overdrawn Accounts
Our third-party card issuing banks fund overdrawn cardholder account balances on our behalf. Amounts funded
are due from us to the card issuing banks based on terms specified in the agreements with the card issuing banks.
Generally, we expect to settle these obligations within twelve months.
Fair Value
Under applicable accounting guidance, fair value is defined as the exchange price that would be received for an
asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability
in an orderly transaction between market participants on the measurement date.
We determine the fair values of our financial instruments based on the fair value hierarchy established under applicable
accounting guidance which requires an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. The following describes the three-level hierarchy:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities
include debt and equity securities and derivative contracts that are traded in an active exchange market, as well as
certain U.S. Treasury securities that are highly liquid and are actively traded in over-the-counter markets
Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted
prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include fixed income securities
with quoted prices that are traded less frequently than exchange-traded instruments. This category generally includes
U.S. government and agency mortgage-backed fixed income securities and corporate fixed income securities