Goodwill and Intangible Assets
|12 Months Ended|
Dec. 31, 2022
|Goodwill and Intangible Assets Disclosure [Abstract]|
|Goodwill and Intangible Assets||Goodwill and Intangible Assets
Goodwill arises from the acquisition method of accounting for business combinations and represents the excess of the purchase price over the fair value of the net assets and other identifiable intangible assets acquired. The fair values of net tangible assets and intangible assets acquired are based upon preliminary valuations and the Company’s estimates and assumptions are subject to change within the measurement period (potentially up to one year from the acquisition date).
The following table presents the changes in the carrying amount of goodwill for the periods indicated:
During the year ended December 31, 2022, the increase in the carrying value of goodwill related to minor adjustments to the assets and liabilities in the purchase price allocation for Company X (Note 3).
The Company performs an annual goodwill impairment assessment on October 31st each year, using a quantitative assessment comparing the fair value of each reporting unit, which the Company has determined to be the entity itself, with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recorded. As a result of the Company’s impairment assessment, no goodwill impairment was recognized as of October 31, 2022.
In addition to its annual review, the Company performs a test of impairment when indicators of impairment are present. During the years ended December 31, 2022, 2021, and 2020, there were no indications of impairment of the Company’s goodwill balances.
Finite-lived Intangible Assets
The following table sets forth the Company’s finite-lived intangible assets resulting from business acquisitions and other purchases, which are amortized over their estimated useful lives:
The following table sets forth amortization expense associated with finite-lived intangible assets, which is included in the consolidated statements of operations as follows:
Amortization of finite-lived intangible assets in cost of net revenue in the consolidated statements of operations results primarily from acquired developed technology.
The following table sets forth the activity related to finite-lived intangible assets:
The Company regularly reviews the carrying amount of its long-lived assets subject to depreciation and amortization, as well as the related useful lives, to determine whether indicators of impairment may exist that warrant adjustments to carrying values or estimated useful lives. An impairment loss is recognized when the sum of the expected future undiscounted net cash flows is less than the carrying amount of the asset. Should impairment exist, the impairment loss is measured based on the excess of the carrying amount of the asset over the asset’s fair value.
During the year ended December 31, 2022, the Company recognized impairment losses related to finite-lived intangible assets of $2.8 million, which was attributable to certain acquired licensed technology. During the year ended December 31, 2021, no impairment losses related to finite-lived intangible assets were recognized. During the year ended December 31, 2020, the Company recognized impairment losses related to finite-lived intangible assets of $0.1 million, which was attributable to certain purchased licensed technology.
The following table presents future amortization of the Company’s finite-lived intangible assets at December 31, 2022:
Indefinite-lived Intangible Assets
Indefinite-lived intangible assets consist entirely of acquired in-process research and development technology, or IPR&D. The following table sets forth the Company’s activities related to indefinite-lived intangible assets:
The Company performs its annual assessment of indefinite-lived intangible assets on October 31st each year or more frequently if events or changes in circumstances indicate that the asset might be impaired utilizing a qualitative test as a precursor to the quantitative test comparing the fair value of the assets with their carrying amount. Based on the qualitative test, if it is more likely than not that indicators of impairment exists, the Company proceeds to perform a quantitative analysis. Based on the Company’s assessment as of October 31, 2022, no indicators of impairment were identified.In addition to its annual review, the Company performs a test of impairment when indicators of impairment are present. During the years ended December 31, 2022, 2021, and 2020, no indicators of impairment were identified and, as a result, no IPR&D impairment losses were recorded.
The entire disclosure for goodwill and intangible assets.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef