Overstock.com 2014 Annual Report Download - page 87

Table of Contents
In accordance with this guidance, we test for impairment of goodwill in the fourth quarter or when we deem that a triggering event has occurred.
Goodwill totaled $2.8 million at December 31, 2014 and 2013. There were no impairments to goodwill recorded during the years ended December 31, 2014,
2013 and 2012.
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We hold cryptocurrency-denominated assets such as bitcoin and we include them in other current assets in our Consolidated Balance Sheets.
Cryptocurrency-denominated assets were $340,000 and zero at December 31, 2014 and 2013, respectively, and are recorded at the lower of cost or market
based on an average unit cost. On an interim basis, we recognize decreases in the value of these assets caused by market declines. Subsequent increases in the
value of these assets through market price recoveries during the same fiscal year are recognized in the later interim period, but may not exceed the total
previously recognized decreases in value during the same year. Gains or losses resulting from changes in the value of our cryptocurrency assets are recorded
in Other income (expense), net in our consolidated statements of income. Losses on cryptocurrency holdings were $8,000 during the year ended December
31, 2014. There were no losses on cryptocurrency holdings for the year ended December 31, 2013.
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Other long-term assets consist primarily of long-term prepaid expenses.
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We review property and equipment and other long-lived assets for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset group may not be recoverable. Recoverability is measured by comparison of the assets’ carrying amount to future undiscounted
net cash flows the asset group is expected to generate. Cash flow forecasts are based on trends of historical performance and management’s estimate of future
performance, giving consideration to existing and anticipated competitive and economic conditions. If such asset group is considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair values. There were no impairments to
long-lived assets recorded during the years ended December 31, 2014, 2013 and 2012.
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In October 2014, we entered into a loan agreement in connection with the construction of our new corporate headquarters. We expect to borrow
against the loan agreement in the second half of 2015. Because amounts borrowed on the loan will carry a variable LIBOR-based interest rate, we will be
affected by changes in certain market conditions. These changes in market conditions may adversely impact our financial performance, and as such, we use
derivatives as a risk management tool to mitigate the potential impact of these changes. We do not enter into derivatives for speculative or trading purposes.
The primary market risk we manage through the use of derivative instruments is interest rate risk on the amounts we expect to borrow under the loan
agreement relating to our new headquarters. To manage that risk, we use interest rate swap agreements. An interest rate swap agreement is a contract between
two parties to exchange cash flows based on underlying notional amounts and indices. Our interest rate swaps entitle us to pay amounts based on a fixed rate
in exchange for receipt of amounts based on variable rates. Because we have not yet borrowed against the loan agreement related to our cash flow hedges, the
notional amounts under our hedges at December 31, 2014 were zero.
Our derivatives are carried at fair value in our consolidated balance sheets in Other long-term liabilities on a gross basis. The accounting for gains
and losses that result from changes in the fair values of derivative instruments depends on whether the derivatives have been designated and qualify as
hedging instruments under GAAP. Our derivatives have been designated and qualify as cash flow hedges. We formally designated and documented, at
inception, the financial instruments as hedges of specific underlying exposures, the risk management objectives, and the strategy for undertaking the hedging
transactions. In addition, we formally assess, both at the inception and at least quarterly thereafter, whether the financial instruments used in hedging
transactions are effective at offsetting changes in the cash flows of the related underlying exposures. To the extent that the hedges are effective, the changes
in fair values of our cash flow hedges are recorded in Accumulated other comprehensive income. Any ineffective portion is immediately recognized into
earnings.
We determine the fair values of our derivatives based on quoted market prices or using standard valuation models (see 
 above). The notional amounts of the derivative financial instruments do not necessarily represent amounts exchanged by the parties and,
therefore, are not a direct measure of our exposure to the financial risks
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