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Table of Contents
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4—INCOME TAXES (Continued)
The IRS is currently examining the Company's tax returns for the years ended December 31, 2001 through 2006. The statute of limitations
for these years has been extended to December 31, 2010. Various state, local and foreign jurisdictions are currently under examination, the most
significant of which are California, New York and New York City, for various tax years beginning with December 31, 2002. These examinations
are expected to be completed in 2011. The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by
$16.5 million within twelve months of the current reporting date due to settlements and the reversal of deductible temporary differences which
will primarily result in a corresponding increase in net deferred tax liabilities. An estimate of other changes in unrecognized tax benefits, while
potentially significant, cannot be made.
NOTE 5—GOODWILL AND INTANGIBLE ASSETS
The Company tests goodwill and indefinite-lived intangible assets for impairment annually, or more frequently, if an event occurs or
circumstances change that would more likely than not reduce the fair value of a reporting unit or the fair value of an indefinite-lived intangible
asset below its carrying value. The Company also reviews definite-lived intangible assets for impairment whenever events or changes in
circumstances indicate that the carrying value of a definite-lived intangible asset may not be recoverable. The Company performed its annual
assessment for impairment of goodwill and indefinite-lived intangible assets as of October 1 in connection with the preparation of its annual
financial statements.
In connection with its annual assessment and its review of definite-lived intangible assets in 2009, the Company identified and recorded
impairment charges at the Search segment related to the write-down of the goodwill and indefinite-lived and definite-lived intangible assets of
IAC Search & Media of $916.9 million, $104.1 million and $24.2 million, respectively. The goodwill and indefinite-lived intangible asset
impairment charges reflect lower growth projections for revenue and profits at IAC Search & Media in future years that reflect the Company's
consideration of industry growth rates, competitive dynamics and IAC Search & Media's current operating strategies and the impact of these
factors on the fair value of IAC Search & Media and its goodwill and indefinite-lived intangible assets. The indefinite-lived intangible asset
impairment charge relates to trade names and trademarks. The definite-lived intangible asset impairment charge primarily relates to certain
technology and advertiser relationships, the carrying values of which were no longer considered recoverable based upon an assessment of future
cash flows related to these assets. Accordingly, these assets were written down to fair value.
In connection with its annual assessment in 2008, the Company identified and recorded impairment charges related to the write-
down of the
goodwill and indefinite-lived intangible assets of Connected Ventures, which is included in the Media & Other segment, of $11.6 million and
$3.4 million, respectively, and the indefinite-lived intangible assets of the Search segment of $9.2 million. The impairment at Connected
Ventures resulted from the Company's assessment of its future profitability. The impairment at the Search segment primarily resulted from the
decline in revenue and profitability at IAC Search & Media's Excite, iWon and MyWay portals businesses.
The Company determines the fair values of its reporting units using discounted cash flow ("DCF") analyses. Determining fair value requires
the exercise of significant judgment, including judgment about the amount and timing of expected future cash flows and appropriate discount
rates. The expected cash flows used in the DCF analyses are based on the Company's most recent budget and, for years beyond the budget, the
Company's estimates, which are based, in part, on forecasted growth rates. The discount rates used in the DCF analyses reflect the risks inherent
in the expected future cash flows of the respective reporting units. The discount rates used in the Company's annual impairment assessments
were the same in 2009 and 2008.
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