Goodwill and Intangible Assets Notes
|12 Months Ended|
Dec. 31, 2015
|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 preliminary fair values of net tangible assets and intangible assets acquired were based upon preliminary valuations and the Company's estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). As of December 31, 2015, the Company completed its purchase price allocation.
The following table presents the changes in the carrying amount of goodwill for the period indicated:
The Company performs an annual impairment review on October 31st. In testing goodwill, the Company utilizes a qualitative assessment, i.e., the “Step 0 Test," as a precursor to the traditional two-step quantitative process. If the Company fails the Step 0 Test, we proceed to test for impairment using the traditional two-step method. Step one is the identification of potential impairment. This involves 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 fair value of a reporting unit exceeds the carrying amount, the goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the impairment test is performed to measure the amount of impairment loss, if any.
Using the Step 0 Test, the Company assessed qualitative factors to determine that it is more likely than not that the fair value of the reporting unit is not less than its carrying value. Based on our review of these qualitative factors and their respective weightings, we determined there were no indications of impairment associated with goodwill. As a result, no goodwill impairment was recognized as of October 31, 2015. In addition to its annual review, the Company performs a test of impairment when indicators of impairment are present. As of December 31, 2015, 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 technology licenses purchased, which continue to be amortized:
The amortization expense related to intangible assets for the years ended December 31, 2015, 2014 and 2013 were $29.9 million, $0.4 million and $0.5 million, respectively.
The following table sets forth the Company’s activities related to finite-lived intangible assets resulting from purchases, additions and the related amortization of acquired finite-lived intangible assets:
The Company regularly reviews the carrying amount of its long-lived assets, as well as the useful lives, to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives. An impairment loss would be 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 would be measured based on the excess of the carrying amount of the asset over the asset’s fair value. During the year ended December 31, 2015, no impairment losses related to finite-lived intangible assets were recognized.
Indefinite-lived Intangible Assets
The following table sets forth the Company’s indefinite-lived intangible assets from additions to IPR&D through an acquisition, impairments, and transfers to developed technologies:
The Company assessed IPR&D intangible assets and trade name intangible assets with indefinite lives for impairment on October 31, 2015. In testing indefinite-lived intangible assets, the Company utilized the qualitative test as a precursor to the Step 2 fair value determination. Based on the qualitative test, if it was more likely than not that indicators of impairment existed, the Company proceeded to perform fair value determination analysis, unless we determined that an asset would be fully abandoned. As a result, the Company recorded $21.6 million in IPR&D impairment losses during the year ended December 31, 2015. The Company recorded a $17.8 million impairment loss for its CSS/FBC IPR&D asset, which was transferred to developed technology on October 31, 2015. This intangible asset was obtained through the Entropic acquisition, having an initial fair value of $18.1 million. Due to updated customer demand information obtained in the fourth quarter, the Company revised its net revenue forecast and utilized the relief-from-royalty method to determine the fair value of the asset. In addition, the Company fully impaired its CDR IPR&D asset, which contributed to a $3.8 million impairment loss. This asset was obtained as part of the Physpeed acquisition with an initial fair value of $3.8 million.
The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.
Reference 1: http://www.xbrl.org/2003/role/presentationRef