THQ 2009 Annual Report Download - page 83

Euro); of which $0.9 million was paid during fiscal 2009, with the remaining $0.8 million included in
accrued and other current liabilities in our March 31, 2009 consolidated balance sheet to be paid in fiscal
2010. There are no further amounts of additional consideration under this acquisition.
Goodwill and other intangible assets recorded related to the above transactions has amounted to
$30.7 million and $5.6 million, respectively, $34.8 million of which is not expected to be deductible for
income tax purposes. The acquisitions were accounted for using the purchase method in accordance with
SFAS No. 141 ‘‘Business Combinations.’’ Accordingly, the net assets were recorded at their estimated fair
values, and operating results were included in our financial statements from the date of acquisition. We did
not present pro forma information as these acquisitions were immaterial to our financial position and
results of operations.
In fiscal 2008, we paid the former shareholders of ValuSoft (acquired in fiscal 2002) additional
consideration of $1.8 million for reaching certain pre-tax income targets pursuant to the purchase
agreement. No amounts of additional consideration are outstanding as of March 31, 2009. Goodwill
recognized in the original transaction and in the payments of the additional consideration has amounted to
$23.0 million.
6. Goodwill
The changes in the carrying amount of goodwill for the fiscal years ended March 31, 2009 and 2008 were as
follows (in thousands):
Balance at March 31, 2007 .................................. $ 88,688
Goodwill acquired ....................................... 30,329
Additional consideration paid for ValuSoft ..................... 1,800
Effect of foreign currency exchange rates and other .............. 1,568
Balance at March 31, 2008 .................................. $122,385
Additional consideration paid for Universomo .................. 1,513
Effect of foreign currency exchange rates and other .............. (5,099)
Impairment charges ..................................... (118,799)
Balance at March 31, 2009 .................................. $ —
We perform an annual assessment of goodwill for impairment during the fourth quarter of each year or
more frequently, if events or circumstances occur that would indicate a reduction in the fair value of the
Company. In the latter half of the third quarter of fiscal 2009, our stock price declined significantly,
resulting in a market capitalization that was substantially below the carrying value of our net assets. In
addition, the unfavorable macroeconomic conditions and uncertainties have adversely affected our
environment. As a result, in connection with the preparation of the financial statements for our fiscal
quarter ended December 31, 2008, we performed an interim goodwill impairment test consistent with
FAS 142.
We performed the first step of the two-step impairment test required by FAS 142, which includes
comparing the fair value of our single reporting unit to its carrying value. Due to market conditions at the
time of the test, our analysis was weighted towards the market value approach, which is based on recent
share prices, and includes a control premium based on recent transactions that have occurred within our
industry, to determine the fair value of our single reporting unit. We concluded that the fair value of our
single reporting unit was less than the carrying value of our net assets and thus performed the second step
of the impairment test. Our step two analysis involved preparing an allocation of the estimated fair value of
our reporting unit to the tangible and intangible assets (other than goodwill) as if the reporting unit had
been acquired in a business combination. Based on our analysis, we recorded goodwill impairment charges
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