Vistaprint 2014 Annual Report Download - page 38

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Goodwill is assigned to reporting units as of the date of the related acquisition. If goodwill is assigned to
more than one reporting unit, we utilize a method that is consistent with the manner in which the amount of goodwill
in a business combination is determined. Costs related to the acquisition of a business are expensed as incurred.
Goodwill, Indefinite-Lived Intangible Assets, and Other Definite Lived Long-Lived Assets. We evaluate
goodwill and indefinite-lived intangible assets for impairment annually or more frequently when an event occurs or
circumstances change that indicate that the carrying value may not be recoverable. We have the option to first
assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less
than its carrying amount. For our annual impairment test as of January 1, 2014, we considered the timing of the
most recent fair value assessment (January 1, 2013), the operating results of the reporting units as compared to the
cash flow forecast used in the fiscal 2013 quantitative analysis, an assessment of our overall market capitalization
as compared to our consolidated net assets, and the consideration of market or economic events that could be
indicative of impairment. Our qualitative assessment for fiscal 2014 determined that there was no indication that the
carrying value of any of our reporting units exceeded its fair value. In addition, there have been no indications of
impairment that would require an updated analysis as of June 30, 2014. In addition to the specific factors mentioned
above, we assess the following individual factors on an ongoing basis such as:
• A significant adverse change in legal factors or the business climate;
• An adverse action or assessment by a regulator;
• Unanticipated competition;
• A loss of key personnel; and
• A more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold
or otherwise disposed of.
If the results of the qualitative analysis were to indicate that the fair value of a reporting unit is less than its
carrying value, the quantitative test is required. Under the quantitative approach, we estimate the fair values of our
reporting units using a discounted cash flow methodology. The discounted cash flows are based on our strategic
plans and best estimates of revenue growth and operating profit by each reporting unit. Our annual analysis
requires significant judgment, including the identification and aggregation of reporting units, discount rate and
perpetual growth rate assumptions, and the amount and timing of expected future cash flows. While we believe our
assumptions are reasonable, actual results could differ from our projections.
We are required to re-evaluate the estimated useful lives on an ongoing basis and evaluate the
recoverability of definite lived long-lived assets, which include, among other items, customer relationships,
developed technology, property, and equipment, when indicators of impairment are present. For purposes of the
recoverability test, long-lived assets are grouped with other assets and liabilities at the lowest level for which
identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The test for
recoverability compares the undiscounted future cash flows of the long-lived asset group to its carrying value. If the
carrying values of the long-lived asset group exceed the undiscounted future cash flows, the assets are considered
to be potentially impaired. The next step in the impairment measurement process is to determine the fair value of
the individual net assets within the long-lived asset group. If the aggregate fair values of the individual net assets of
the group are less than the carrying values, an impairment charge is recorded equal to the excess of the aggregate
carrying value of the group over the aggregate fair value. The loss is allocated to each long-lived asset within the
group based on their relative carrying values, with no asset reduced below its fair value. The identification and
evaluation of a potential impairment requires judgment and is subject to change if events or circumstances
pertaining to our business change.
Recently Issued or Adopted Accounting Pronouncements
See Item 8 of Part II, “Financial Statements and Supplementary Data — Note 2 — Summary of Significant
Accounting Policies — Recently Issued or Adopted Accounting Pronouncements."