Juno 2012 Annual Report Download - page 64

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The process of evaluating the potential impairment of long-lived intangible assets is subjective and requires significant judgment on matters such
as, but not limited to, the asset group to be tested for recoverability. We are also required to make estimates that may significantly impact the outcome of
the analyses. Such estimates include, but are not limited to, future operating performance and cash flows, cost of capital, terminal values, and remaining
economic lives of assets.
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As a result of the lower than expected fourth quarter 2012 revenues and operating income within the MyPoints reporting unit, we performed an
impairment test of the assets within this reporting unit and recorded an impairment charge totaling $0.3 million related to certain trademarks. This
impairment charge was included in impairment of goodwill, intangible assets and long-lived assets in the consolidated statements of operations.
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Member redemption liability for online loyalty marketing service points represents the estimated costs associated with the obligation of MyPoints
to redeem outstanding points accumulated by its online loyalty marketing service members, as well as those points purchased by its advertisers for use
in such advertisers' promotional campaigns, less an allowance for points expected to expire prior to redemption. The estimated cost of points is primarily
presented in cost of revenues, except for the portion related to member acquisition activities, internal marketing surveys and other non-revenue
generating activities, which are presented in sales and marketing expenses. The member redemption liability is recognized when members earn points,
less an allowance for points expected to expire, and is reduced when members redeem accumulated points upon reaching required redemption
thresholds or when points expire prior to redemption.
MyPoints members may redeem points for third-party gift cards and other rewards. Members earn points when they respond to direct marketing
offers delivered by MyPoints, purchase goods or services from advertisers, engage in certain promotional campaigns of advertisers, or engage in other
specified activities.
The member redemption liability is estimated based upon the weighted-average cost and number of points that may be redeemed in the future. The
weighted-average cost of points is calculated by taking the total cost of items fulfilled divided by total points redeemed. MyPoints purchases gift cards
and other awards from merchants at a discount and sets redemption levels for its members. The discounts and points needed to redeem awards vary by
merchant and award denomination. MyPoints has the ability to adjust the number of points required to redeem awards to reflect changes in the cost of
awards.
MyPoints accounts for and reduces the gross points issued by an estimate of points that will never be redeemed by its members. This reduction is
calculated based on an analysis of historical point-earning trends, redemption activities and individual member account activity. MyPoints' historical
analysis takes into consideration the total points in members' accounts that have been inactive for six months or longer, less an estimated reactivation
rate, plus an estimate for future cancelations of points that have not yet been outstanding for 180 days. Changes in, among other factors, the net number
of points issued, redemption activities and members' activity levels could materially impact the member redemption liability. A 100 basis point increase
or decrease in the estimate of points that will never be redeemed would increase or decrease our member redemption liability at December 31, 2012 by
approximately $90,000.
Points in active MyPoints accounts do not expire; however, unredeemed points expire after twelve consecutive months of inactivity. For purposes
of the member redemption liability, "inactive" means a lack of all of the following: email response; survey completion; profile update; and any point-
earning or
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