Yahoo 2014 Annual Report Download - page 67

Amortization of intangibles for the year ended December 31, 2013 increased $9 million, or 25 percent,
as compared to 2012. The year-over-year increase in amortization of intangibles from 2012 to 2013
was primarily driven by incremental amortization from acquisitions completed in 2013, partially offset
by a decrease in amortization of intangibles driven by fully amortized assets acquired in prior years.
Amortization of intangibles represented approximately 2 percent of GAAP revenue for the year
ended December 31, 2014, compared to 1 percent in both 2013 and 2012.
Gains on Sales of Patents
For the year ended December 31, 2014, we sold certain patents and recorded gains on sales of
patents of approximately $98 million. These gains on sales of patents include patents sold to a
wholly-owned affiliate of Alibaba Group for a gain on sale of $24 million and patents sold to Yahoo
Japan for a gain on sale of $12 million. See “Significant Transactions—Patent Sale and License
Agreement” for additional information on significant patents sold during 2014.
For the year ended December 31, 2013, we sold certain patents and recorded gains on sales of
patents of approximately $80 million. The gains on sales of patents were primarily related to a patent
sale agreement with a wholly-owned affiliate of Alibaba Group entered into during 2013 for $70
million.
See Note 4—“Acquisitions and Dispositions” in the Notes to our consolidated financial statements for
additional information.
Goodwill Impairment Charge
We conducted our annual goodwill impairment test as of October 31, 2014 and determined that the
fair values of our reporting units, with the exception of (1) the Middle East and (2) India & Southeast
Asia reporting units, exceeded their carrying values and therefore goodwill in those reporting units
was not impaired. We concluded that the carrying value of each of the Middle East and India &
Southeast Asia reporting units exceeded its fair value and recorded a goodwill impairment charge of
approximately $79 million and $9 million, respectively. During 2013, we recorded a $64 million
goodwill impairment charge for the Middle East reporting unit.
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 year period, 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 we made in assessing the
fair value of goodwill could cause us 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 our 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.
See Note 5—“Goodwill” in the Notes to our consolidated financial statements for additional
information.
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