TiVo 2015 Annual Report Download - page 77

Table of Contents
Goodwill
Goodwill is evaluated for potential impairment annually and whenever events or changes in circumstances indicate the carrying amount of
goodwill may not be recoverable. Goodwill is evaluated annually for potential impairment at the reporting unit level as of the beginning of the fourth quarter.
Qualitative factors are first assessed to determine whether events or changes in circumstances indicate it is more
- likely - than - not that the fair value
of a reporting unit is less than its carrying amount. If, based on the qualitative assessment, it is considered more - likely - than - not that the fair value of a
reporting unit is less than its carrying amount, then a quantitative two - step impairment test is performed. In the first step of the quantitative impairment test,
the fair value of each reporting unit is compared to its carrying amount. The fair value of the Intellectual Property Licensing reporting unit is estimated using
an income approach and the fair value of the Product reporting unit is estimated by weighting the fair values derived from an income approach and a market
approach. Under the income approach, the fair value of a reporting unit is estimated based on the present value of estimated future cash flow and considers
estimated revenue growth rates, future operating margins and risk
- adjusted discount rates. Under the market approach, fair value is estimated based on
market multiples of revenue or earnings derived from comparable publicly - traded companies. The carrying amount of a reporting unit is determined by
assigning the assets and liabilities, including goodwill and intangible assets, to the reporting unit. If the fair value of a reporting unit exceeds its carrying
amount, goodwill is not impaired and no further testing is performed.
If the fair value of the reporting unit is less than its carrying amount, the second step of the goodwill impairment test is performed to measure the
amount of impairment loss, if any. In the second step, the reporting unit's assets, including any unrecognized intangible assets, liabilities and non
-
controlling interests are measured at fair value in a hypothetical analysis to calculate the implied fair value of goodwill for the reporting unit in the same
manner as if the reporting unit was being acquired in a business combination. If the carrying amount of a reporting unit ’ s goodwill exceeds its implied fair
value, an impairment loss equal to the difference is recorded.
Deferred Revenue
Deferred revenue represents amounts received from customers for which the revenue recognition criteria have not been satisfied.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amount of assets and liabilities and their respective tax bases and
operating loss and tax carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates applicable to the years in which those
temporary differences are expected to reverse. A valuation allowance is recorded to reduce deferred tax assets to the amount that is more likely than not to
be realized.
From time to time, the Company engages in transactions in which the tax consequences may be subject to uncertainty. Significant judgment is
required in assessing and estimating the tax consequences of these transactions. Accruals for unrecognized tax benefit liabilities, which represent the
difference between a tax position taken or expected to be taken in a tax return and the benefit recognized for financial reporting purposes, are recorded when
the Company believes it is not more
- likely - than - not that the tax position will be sustained on examination by the taxing authorities based on the technical
merits of the position. Adjustments to unrecognized tax benefits are recognized when facts and circumstances change, such as the closing of a tax audit,
notice of an assessment by a taxing authority or the refinement of an estimate. Income tax expense includes the effects of adjustments to unrecognized tax
benefits, as well as any related interest and penalties.
Revenue Recognition
The Company
’ s revenue from continuing operations primarily consists of license fees for the Company's IPG products and patents, content
protection technologies and entertainment Metadata and advertising revenue. The Company recognizes revenue when the following conditions are met:
(i) there is persuasive evidence that an arrangement exists, (ii) delivery has occurred or service has been rendered, (iii) the price is fixed or determinable and
(iv) collection is reasonably assured.
Revenue arrangements with multiple deliverables are divided into separate units of accounting when the delivered item has value to the customer
on a stand
- alone basis. The Company allocates the total consideration among the various elements based on their relative selling price using vendor
specific objective evidence ("VSOE") of selling price, if it exists;
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