ServiceMagic 2011 Annual Report Download - page 51

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of its ordinary cost/benefit marketing planning process. Accordingly, the Company's aggregate level of advertising, and the increased
concentration of that advertising on NBC Universal network and cable channels, does not reflect what our advertising effort would otherwise be
without these credits. As a result, management believes that treating the NBC Universal Advertising as an expense does not appropriately reflect
its true cost/benefit relationship, nor does it best reflect the Company's long-term level of advertising expenditures. Nonetheless, while the
benefits directly attributable to television advertising are always difficult to determine, and especially so with respect to the NBC Universal
Advertising due to its incrementality and heavy concentration, it is likely that the Company does derive benefits from it, though management
believes such benefits are generally less than those received through its regular advertising for the reasons stated above. Operating Income
Before Amortization therefore has the limitation of including those benefits while excluding the associated expense.
Amortization of intangibles (including impairment of intangibles, if applicable) and goodwill impairment (if applicable) are non-cash
expenses relating primarily to acquisitions. At the time of an acquisition, the identifiable definite-lived intangible assets of the acquired
company, such as customer lists, technology and supplier agreements, are valued and amortized over their estimated lives. Value is also assigned
to acquired indefinite-lived intangible assets, which comprise trade names and trademarks, and goodwill that are not subject to amortization. An
impairment is recorded when the carrying value of an intangible asset or goodwill exceeds its fair value. While it is likely that we will have
significant intangible amortization expense as we continue to acquire companies, we believe that intangible assets represent costs incurred by the
acquired company to build value prior to acquisition and the related amortization and impairment charges of intangible assets or goodwill, if
applicable, are not ongoing costs of doing business.
RECONCILIATION OF OPERATING INCOME BEFORE AMORTIZATION
For a reconciliation of Operating Income Before Amortization to operating income (loss) by reportable segment for the years ended
December 31, 2011, 2010 and 2009, see Note 15 to the consolidated financial statements.
48