Yahoo 2014 Annual Report Download - page 119

Note 5 Goodwill
The changes in the carrying amount of goodwill for the years ended December 31, 2013 and 2014
were as follows (in thousands):
Americas(1) EMEA(2) Asia Pacific(3) Total
Net balance as of January 1, 2013 $2,870,031 $593,613 $363,105 $3,826,749
Acquisitions 934,135 1,567 1,921 937,623
Goodwill impairment charge — (63,555) — (63,555)
Foreign currency translation adjustments (1,832) 15,231 (34,568) (21,169)
Net balance as of December 31, 2013 $3,802,334 $546,856 $330,458 $4,679,648
Acquisitions and other 533,894 110,203 (607) 643,490
Goodwill impairment charge — (79,135) (9,279) (88,414)
Foreign currency translation adjustments (2,271) (46,109) (22,690) (71,070)
Net balance as of December 31, 2014 $4,333,957 $531,815 $297,882 $5,163,654
(1) Gross goodwill balances for the Americas segment were $2.9 billion as of January 1, 2013 and
$4.3 billion as of December 31, 2014.
(2) Gross goodwill balances for the EMEA segment were $1.1 billion as of both January 1, 2013 and
$1.2 billion as of December 31, 2014. The EMEA segment includes accumulated impairment
losses of $551 million as of January 1, 2013, and $630 million as of December 31, 2014.
(3) Gross goodwill balances for the Asia Pacific (“APAC”) segment were $513 million as of
January 1, 2013 and $457 million as of December 31, 2014. The APAC segment includes
accumulated impairment losses of $150 million as of January 1, 2013 and $159 million as of
December 31, 2014.
Goodwill Impairment Testing
The fair values of the U.S. & Canada, Latin America, Europe, Taiwan, Hong Kong, and Australia & New
Zealand reporting units were estimated using an average of a market approach and an income
approach as this combination was deemed to be the most indicative of the Company’s estimated fair
value in an orderly transaction between market participants and is consistent with the methodology
used for the goodwill impairment test in prior years. In addition, the Company ensures that the fair
values estimated under these two approaches are comparable with each other. The estimated fair
value of the Tumblr reporting unit was estimated using the market approach and was deemed to be
the most indicative of our estimated fair value in an orderly transaction between market participants.
The estimated fair values of the Middle East and India & Southeast Asia reporting units were
estimated using the income approach as the market approach yielded a much higher fair value and
was not comparable with the income approach. Under the market approach, the Company utilizes
publicly-traded comparable company information to determine revenue and earnings multiples that
are used to value its reporting units adjusted for an estimated control premium. Under the income
approach, the Company determines fair value based on estimated future cash flows of each reporting
unit discounted by an estimated weighted-average cost of capital, reflecting the overall level of
inherent risk of a reporting unit and the rate of return an outside investor would expect to earn.
Determining the estimated fair value of a reporting unit is judgmental in nature and requires the use
of significant estimates and assumptions, including selection of market comparables, estimated
future cash flows, and discount rates.
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