LifeLock 2013 Annual Report Download - page 72

method, and the market approach methodology of valuation, which considers values of comparable businesses, to estimate the fair values of our reporting
units. We do not believe that a cost approach is relevant to measuring the fair values of our reporting units.
Significant management judgment is required when estimating the fair values of our reporting units, including the forecasting of future operating
results, the discount rates and expected future growth rates that we will use in the discounted cash flow method of valuation, and the selection of comparable
businesses that we will use in the market approach. If the estimated fair value of the reporting unit exceeds the carrying value assigned to that unit, goodwill is
not impaired and no further analysis is required.
If the carrying value assigned to a reporting unit exceeds its estimated fair value in the first step, then we perform the second step of the impairment test.
In this step, we assign the fair value of the reporting unit calculated in step one to all of the assets and liabilities of that reporting unit, as if a market
participant just acquired the reporting unit in a business combination. The excess of the fair value of the reporting unit determined in the first step of the
impairment test over the total amount assigned to the assets and liabilities in the second step of the impairment test represents the implied fair value of goodwill.
If the carrying value of a reporting unit’s goodwill exceeds the implied fair value of its goodwill, we would record an impairment loss equal to the difference. If
there is no such excess, then all goodwill for that reporting unit is considered not to be impaired. No impairment was recorded to goodwill for the year ended
December 31, 2013.

In connection with our acquisitions of ID Analytics and Lemon, we recorded certain finite-lived intangible assets. We amortize the acquisition date fair
value of these assets over the estimated useful lives of the assets.

We compute basic earnings per share by dividing net income available (loss attributable) to common stockholders by the weighted-average number of
common shares outstanding for the period. We determine net income available (loss attributable) to common stockholders by deducting the accr etion on
convertible redeemable preferred stock and the net income allocable to convertible redeemable preferred stock, determined under the two class method, from net
income (loss). We compute diluted earnings per share giving effect to all potentially dilutive common stock equivalents, including share-based compensation,
convertible redeemable preferred stock, warrants to acquire common stock, and warrants to acquire convertible redeemable preferred stock. We make
adjustments to the diluted net income available (loss attributable) to common stockholders to reflect the reversal of gains on the change in the value of warrant
liabilities and additional accretion on convertible redeemable preferred stock, assuming conversion of warrants to acquire convertible redeemable preferred
stock at the beginning of the period. We offset these adjustments by reductions in the net income allocable to convertible redeemable preferred stockholders for
those securities that were assumed to convert prior to the conversion in connection with our IPO. Those securities determined to be anti-dilutive as common
stock equivalents are excluded from the calculation of diluted earnings per share; however, such securities continue to be included in the application of the two-
class method to the extent applicable.

In the normal course of business, we are exposed to credit risk. We believe our concentration of credit risk with respect to trade receivables is limited
because of the large number of customers and customer dispersion across many different geographic and economic environments. We maintain an allowance
for doubtful trade accounts receivable based upon factors surrounding the credit risk of specific clients, historical trends, and other information.

Cash includes cash on hand and cash held with banks. Cash equivalents are short-term, highly liquid investments with original maturities of three
months or less when acquired. Cash and cash equivalents are deposited in or managed by major financial institutions and at times exceed Federal Deposit
Insurance Corporation insurance limits.
Cash and cash equivalents also include credit card and debit card receivables. The majority of payments due from financial intermediaries for credit
card and debit card transactions process within 72 hours, except for transactions occurring on a Friday, which are generally processed the following Monday.
Amounts due from financial intermediaries for these transactions classified as cash and cash equivalents totaled $1,623 and $2,356 as of December 31,
2013 and 2012, respectively.

We hold investments in marketable securities consisting of corporate debt securities, municipal debt securities, and certificates of deposit. We determine
the appropriate classification of marketable securities at the time of purchase and reevaluate such determination at each balance sheet date. As of December 31,
2013, we classified all marketable securities as current as such investments are availabl e to fund current operations. Based on our intentions regarding our
marketable securities, all marketable securities are classified as available-for-sale and are carried at fair value with unrealized gains and losses recorded as a
separate component of other comprehensive income, net of income taxes on the consolidated statements of comprehensive income (loss). Realized gains and
losses and declines in fair value determined to be other-than-temporary are determined using the specific-identification method and are reflected as a component
of other income (expense) in the consolidated statements of operations. We periodically review our marketable securities for other-than temporary declines in
fair value and write down such marketable
69