ServiceMagic 2012 Annual Report Download - page 59

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company capitalizes certain internal use software costs including external direct costs utilized in developing or obtaining the software
and compensation and other employee-related costs for personnel directly associated with the development of the software. Capitalization of
such costs begins when the preliminary project stage is complete and ceases when the project is substantially complete and ready for its intended
purpose. During 2011, the Company wrote-off $4.9 million in capitalized software costs associated with the exit of the Company's direct
sponsored listings business. The net book value of capitalized internal use software is $33.4 million and $29.2 million
at December 31, 2012 and
2011, respectively.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill acquired in business combinations is assigned to the reporting unit(s) that are expected to benefit from the combination as of the
acquisition date. The Company assesses goodwill and indefinite-lived intangible assets for impairment annually as of October 1, 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. In 2012, the Company adopted Accounting Standards Update ("ASU") 2011-08,
"Testing Goodwill for Impairment", which gives companies the option to qualitatively assess whether it is more likely than not that the fair value
of a reporting unit is less than its carrying value. If it is not more likely than not that the fair value of the reporting unit is less than its carrying
value, no further assessment of that reporting unit's goodwill is necessary. If it is more likely than not that the fair value of the reporting unit is
less than its carrying value, then the goodwill must be tested using a two-step process based on prior accounting guidance, and if the carrying
value of a reporting unit's goodwill exceeds its implied fair value, an impairment loss equal to the excess is recorded. The Company also adopted
Accounting Standards Update 2012-02 "Testing Indefinite-Lived Intangible Assets for Impairment" in 2012, which gives companies the option
to qualitatively assess whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. If
it is not more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying value, the fair value of the asset
does not need to be determined. If it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying
value, then the indefinite-lived intangible asset must be tested based on prior accounting guidance, and if its carrying value exceeds its estimated
fair value, an impairment loss equal to the excess is recorded. See Note 6 for discussion of impairment charges recorded in 2010. There are no
impairment charges recorded in 2012 and 2011.
The Company's reporting units are consistent with its determination of its operating segments. Goodwill is tested for impairment at the
reporting unit level. The Company's operating segments, reporting units and reportable segments are as follows:
Media and Other include other operating segments that do not have goodwill. See Note 15 for additional information regarding the
Company's method of determining operating and reportable segments.
The fair value of each of the Company's seven reporting units, excluding Tutor which was acquired in December 2012, exceed their
carrying values by more than 20% at October 1, 2012, the date of our most recent annual impairment assessment.
Asset Category Estimated
Useful Lives
Buildings and leasehold improvements 3 to 39 Years
Computer equipment and capitalized software 2 to 3 Years
Furniture and other equipment 3 to 10 Years
Operating Segment
and
Reporting Unit Reportable
Segment
Search & Applications Search & Applications
Match Match
HomeAdvisor
Local
CityGrid Media Local
Connected Ventures
Media
DailyBurn Media
Shoebuy
Other
Tutor Other