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Table of Contents
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 5—GOODWILL AND INTANGIBLE ASSETS (Continued)
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 reflected lower projections for revenue and profits at IAC Search & Media in future years that reflected the Company's
consideration of industry growth rates, competitive dynamics and IAC Search & Media's 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 related to trade names and trademarks. The definite-lived intangible asset impairment charge primarily related 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, and typically corroborates the
concluded fair value using a market based valuation approach. 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. Assumptions used in the DCF analyses, including the discount rate, are assessed annually based on the reporting units' current
results and forecast, as well as macroeconomic and industry specific factors. The discount rates used in the Company's annual goodwill
impairment assessment ranged from 13% to 20% in both 2010 and 2009.
The Company determines the fair values of its indefinite-lived intangible assets using avoided royalty DCF analyses. Significant judgments
inherent in these analyses include the selection of appropriate royalty and discount rates and estimating the amount and timing of expected future
cash flows. The discount rates used in the DCF analyses reflect the risks inherent in the expected future cash flows generated by the respective
intangible assets. The royalty rates used in the DCF analyses are based upon an estimate of the royalty rates that a market participant would pay
to license the Company's trade names and trademarks. Assumptions used in the avoided royalty DCF analyses, including the discount rate and
royalty rate, are assessed annually based on the actual and projected cash flows related to the asset, as well as macroeconomic and industry
specific factors. The discount rates used in the Company's annual indefinite-lived impairment assessment ranged from 13% to 20% in both 2010
and 2009, and the royalty rates used ranged from 1% to 10% in both 2010 and 2009.
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