Vistaprint 2014 Annual Report Download - page 61

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Goodwill
The evaluation of goodwill for impairment is performed at a level referred to as a reporting unit. A reporting
unit is either the “operating segment level” or one level below, which is referred to as a “component.” The level at
which the impairment test is performed requires an assessment as to whether the operations below the operating
segment should be aggregated as one reporting unit due to their similarity or reviewed individually. Goodwill is
evaluated for impairment on an annual basis during the fiscal third quarter or more frequently when an event occurs
or circumstances change that indicate that the carrying value may not be recoverable. Goodwill is considered to be
impaired when the carrying amount of a reporting unit exceeds its estimated fair value.
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 value. If the results of this analysis indicate that the fair value of
a reporting unit is less than its carrying value, the quantitative impairment test is required; otherwise, no further
assessment is necessary. To perform the quantitative approach, we estimate the fair value of our reporting units
using a discounted cash flow methodology. If the carrying value of the net assets assigned to the reporting unit
exceeds the fair value of the reporting unit, then a second step of the impairment test is performed in order to
determine the implied fair value of our reporting unit’s goodwill. If the carrying value of a reporting unit’s goodwill
exceeds its implied fair value, then we would record an impairment loss equal to the difference.
In fiscal 2014, we performed the qualitative assessment as of January 1, 2014 and determined that there is
no indication that the carrying value of any of our reporting units exceeds its fair value. There have been no
indications of impairment that would require an updated analysis as of June 30, 2014.
Debt Issuance Costs
Expenses associated with the issuance of debt instruments are capitalized and are amortized over the
terms of the respective financing arrangement using the effective interest method, or on a straight-line basis
through the maturity date for our revolving credit facility. During the years ended June 30, 2014 and 2013, we
capitalized debt issuance costs related to our credit facility arrangements of $1,319 and $1,887, respectively.
Amortization of these costs is included in interest income (expense), net in the consolidated statements of
operations and amounted to $765, $556 and $206, for the years ended June 30, 2014, 2013 and 2012,
respectively. Unamortized debt issuance costs were $2,334 and $2,963 as of June 30, 2014 and 2013, respectively.
When we make changes to our credit facility, we re-evaluate the capitalization of these costs which could result in
the immediate recognition of any unamortized debt issuance costs in our statement of operations.
Investments in Equity Interests
We record our share of the results of investments in equity interests and any related amortization, within
loss in equity interests on the consolidated statements of operations. We review our investments for other-than-
temporary impairment whenever events or changes in business circumstances indicate that the carrying value of
the investment may not be fully recoverable. Investments identified as having an indication of impairment are
subject to further analysis to determine if the impairment is other-than-temporary and this analysis requires
estimating the fair value of the investment, which involves considering factors such as comparable valuations of
public companies similar to the entity in which we have an equity investment, current economic and market
conditions, the operating performance of the entities including current earnings trends and forecasted cash flows,
and other entity and industry specific information.
Derivative Financial Instruments
We record all derivatives on the consolidated balance sheet at fair value. The accounting for changes in the
fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative
as being a hedging relationship, and whether the hedging relationship has satisfied the criteria necessary to apply
hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of
an asset, liability or firm commitment attributable to a particular risk are considered fair value hedges. Derivatives
designated and qualifying as hedges of the exposure to variability in expected future cash flows, or other types of
forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of
the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of
the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the
hedged forecasted transaction in a cash flow hedge. We also enter into derivative contracts that are intended to
Form 10-K