Vistaprint 2015 Annual Report Download - page 42

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based on detailed cash flow valuations that use information and assumptions provided by management. The
valuations are dependent upon a myriad of factors including historical financial results, estimated customer renewal
rates, projected operating costs and discount rates. We estimate the fair value of contingent consideration at the
time of the acquisition using all pertinent information known to us at the time to assess the probability of payment of
contingent amounts. We allocate any excess purchase price over the fair value of the net tangible and intangible
assets acquired and liabilities assumed to goodwill. The assumptions used in the valuations for our fiscal 2014 and
2015 acquisitions may differ materially from actual results depending on performance of the acquired businesses
and other factors. While we believe the assumptions used were appropriate, different assumptions in the valuation
of assets acquired and liabilities assumed could have a material impact on the timing and extent of impact on our
statements of operations.
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, 2015, we evaluated each of our five
reporting units with goodwill individually. We considered the timing of our most recent fair value assessment and
associated headroom, the actual operating results as compared to the cash flow forecasts used in those fair value
assessments, the current long-term forecasts for each reporting unit, and the general market and economic
environment of each reporting unit. Our qualitative assessment for fiscal 2015 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, 2015. 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 evaluate the estimated useful lives and recoverability of definite lived long-lived assets
(for example, customer relationships, developed technology, property, and equipment) on an ongoing basis 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