Yahoo 2014 Annual Report Download - page 120

In 2014, as a result of the annual goodwill impairment test, the Company concluded that the carrying
value of the Middle East reporting unit, included in the EMEA reportable segment, and the carrying
value of the India & Southeast Asia reporting unit included in the Asia Pacific reportable segment
both exceeded their respective fair values. As required by the second step of the impairment test, the
Company performed an allocation of the fair value to all the assets and liabilities of the reporting unit,
including identifiable intangible assets, based on their estimated fair values, to determine the implied
fair value of goodwill. Accordingly, the Company recorded a goodwill impairment charge related to
the Middle East and India & Southeast Asia reporting units of $79 million and $9 million, respectively,
during the quarter ended December 31, 2014 for the difference between the carrying value of the
goodwill in the reporting unit and its implied fair value with no goodwill remaining in either reporting
unit. The impairment resulted from a decline in business conditions in the Middle East and India &
Southeast Asia during the latter half of 2014.
For the Europe reporting unit, the percentage by which the estimated fair value exceeded the
carrying value as of October 31, 2014 was 12 percent and the amount of goodwill allocated to the
Europe reporting unit was $465 million. The key assumptions used for the 2014 goodwill impairment
test for Europe were 1) revenue ex-TAC cumulative average growth rate of approximately 5 percent
over the next 5 years, 2) adjusted EBITDA growth rate of 15 percent over the next five years, 3)
discount rate of 11 percent, and 4) terminal value growth rate of 3 percent. Determining the fair value
of a reporting unit is judgmental in nature and requires the use of estimates and key assumptions. It is
reasonably possible that changes in judgments, assumptions and estimates the Company made in
assessing the fair value of goodwill could cause the Company to consider some portion or all of the
remaining goodwill of the Europe reporting unit to become impaired. In addition, a future decline in
the overall European market conditions and/or changes in the Company’s market share in the
European market could negatively impact the market comparables, estimated future cash flows and
discount rates used in the market and income approaches to determine the fair value of the reporting
unit and could result in an impairment charge in the foreseeable future.
In 2013, as a result of the annual goodwill impairment test, the Company concluded that the carrying
value of the Middle East reporting unit, included in the EMEA reportable segment, exceeded its fair
value. The Company recorded a goodwill impairment charge of approximately $64 million during the
quarter ended December 31, 2013 for the difference between the carrying value of the goodwill in the
reporting unit and its implied fair value with goodwill remaining of $77 million. The impairment
resulted from a decline in business conditions in the Middle East during the latter half of 2013.
The estimated fair values of the Company’s other reporting units exceeded their estimated carrying
values and therefore goodwill in those reporting units was not impaired.
Note 6 Intangible Assets, Net
The following table summarizes the Company’s intangible assets, net (in thousands):
December 31, 2013
Gross Carrying
Amount
Accumulated
Amortization(*) Net
Customer, affiliate, and advertiser related relationships $293,612 $ (87,794) $205,818
Developed technology and patents 261,435 (120,936) 140,499
Trade names, trademarks, and domain names 107,381 (35,890) 71,491
Total intangible assets, net $662,428 $(244,620) $417,808
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