Yahoo 2015 Annual Report Download - page 126

Download and view the complete annual report

Please find page 126 of the 2015 Yahoo annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 180

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172
  • 173
  • 174
  • 175
  • 176
  • 177
  • 178
  • 179
  • 180

Step Two
For any reporting units, where the carrying value exceeds the estimated fair value, as determined in
step one, the Company performs step two to measure the amount of impairment, if any. The second
step of the quantitative test is performed by comparing the carrying value of the goodwill in the
reporting unit to its implied fair value. The implied fair value is calculated by allocating all of the
assets and liabilities of the reporting unit, including any unrecognized intangible assets, in a
hypothetical analysis that calculates the implied fair value of goodwill in the same manner as if the
reporting unit was being acquired in a business combination. An impairment charge is recognized for
the excess of the carrying value of goodwill over its implied fair value.
As identified above, in step one, in 2015, the carrying value of the U.S. & Canada, Europe, Tumblr and
Latin America reporting units exceeded the estimated fair value. The Company completed an
assessment of the implied fair value of these reporting units, which resulted in an impairment of all
goodwill for the U.S. & Canada, Europe, and Latin America reporting units and a partial impairment
for the Tumblr reporting unit. The Company recorded goodwill impairment charges of $3,692 million,
$531 million, $230 million and $8 million, associated with the U.S. & Canada, Europe, Tumblr, and Latin
America reporting units, respectively, for the year ended December 31, 2015. The impairments were a
result of a combination of factors, including a sustained decrease in our market capitalization in
fourth quarter of 2015 and lower estimated projected revenue and profitability in the near term. The
lower estimated projected cash flows and higher discount rates were used to estimate the fair value
of each reporting unit affected by such changes. The remaining goodwill as of December 31, 2015 was
$808 million, of which $519 million relates to the Tumblr reporting unit. Given the partial impairment
recorded in the Tumblr reporting unit in 2015, 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 Tumblr reporting unit to
become impaired. In addition, a future decline in market conditions and/or changes in the Company’s
market share 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 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.
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.
122