Tucows 2014 Annual Report Download - page 160

(e) Property and equipment
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is provided on a
straight-line basis so as to depreciate the cost of depreciable assets over their estimated useful lives at the following rates:
Asset Rate
Computer equipment 30%
Computer software 100%
Furniture and equipment 20%
Leasehold improvements Over term of
lease
The Company reviews the carrying values of its property and equipment for potential impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the estimated
undiscounted future cash flows expected to result from the use of the group of assets and its eventual disposition is less
than its carrying amount, it is considered to be impaired. The amount of the impairment loss recognized is measured as
the amount by which the carrying value of the asset exceeds the fair value of the asset, with fair value being determined
based upon discounted cash flows or appraised values, depending on the nature of the assets.
(f) Goodwill and Other Intangible assets
Goodwill
Goodwill represents the excess of purchase price over the fair values assigned to the net assets acquired in
business combinations. The Company does not amortize goodwill. Impairment testing for goodwill is performed annually
in the fourth quarter of each year or more frequently if impairment indicators are present. Impairment testing is performed
at the operating segment level. The Company has determined that it has two operating segments, Domain Services and
Network Access Services.
The Company performs a qualitative assessment to determine whether there are events or circumstances which
would lead to a determination that it is more likely than not that goodwill has been impaired. If, after this qualitative
assessment, the Company determines that it is not more likely than not that goodwill has been impaired, then no further
quantitative testing is necessary. In performance of the qualitative test, an evaluation is made of the impact of various
factors to the expected future cash flows attributable to its operating segments and to the assumed discount rate which
would be used to present value those cash flows. Consideration is given to factors such as, macro-economic and industry
and market conditions including the capital markets and the competitive environment amongst others. In the event that
the qualitative tests indicate that there may be impairment, quantitative impairment testing is required.
In performance of the quantitative test, the Company uses a discounted cash flow or income approach in which
future expected cash flows at the operating segment level are converted to present value using factors that consider the
timing and risk of the future cash flows. The estimate of cash flows used is prepared on an unleveraged debt-free basis.
The discount rate reflects a market-derived weighted average cost of capital. The Company believes that this approach is
appropriate because it provides a fair value estimate based upon the Company’s expected long-term operating and cash
flow performance for its operating segment. The projections are based upon the Company’s best estimates of projected
economic and market conditions over the related period including growth rates, estimates of future expected changes in
operating margins and cash expenditures.
Other significant estimates and assumptions include terminal value growth rates, terminal value margin rates,
future capital expenditures and changes in future working capital. If assumptions and estimates used to allocate the
purchase price or used to assess impairment prove to be inaccurate, future asset impairment charges could be required.
Intangibles Assets not subject to amortization
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