Annual report pursuant to Section 13 and 15(d)

Goodwill and Intangible Assets Notes

v3.3.1.900
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

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:    
 
Goodwill
 
(in thousands)
Balance as of December 31, 2014
$
1,201

Acquisition of Entropic on April 30, 2015
48,578

Balance as of December 31, 2015
$
49,779



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.
Acquired Intangibles
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:
 
 
 
December 31, 2015
 
December 31, 2014
 
Weighted
Average
Useful Life
(in Years)
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Gross Carrying Value
 
Accumulated Amortization
 
Net Carrying Amount
 
 
 
(in thousands)
Licensed technology
3
 
$
2,921

 
$
(2,725
)
 
$
196

 
$
2,821

 
$
(2,390
)
 
$
431

Developed technology
7
 
47,000

 
(4,652
)
 
42,348

 
2,700

 
(45
)
 
2,655

Trademarks and trade names
7
 
1,700

 
(162
)
 
1,538

 

 

 

Customer relationships
5
 
4,700

 
(627
)
 
4,073

 

 

 

Backlog
1
 
24,200

 
(24,200
)
 

 

 

 

 
 
 
$
80,521

 
$
(32,366
)
 
$
48,155

 
$
5,521

 
$
(2,435
)
 
$
3,086


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:
 
Gross Carrying Amount
 
(in thousands)
Balance as of December 31, 2014
$
3,086

Purchased finite-lived intangible assets from Entropic
74,200

Addition
100

Transfers to developed technology from IPR&D
700

Amortization
(29,931
)
Balance as of December 31, 2015
$
48,155



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:
 
Gross Carrying Amount
 
(in thousands)
Balance as of December 31, 2014
$
7,300

Purchased Entropic indefinite-lived intangible asset
18,200

Transfers to developed technology from IPR&D
(700
)
IPR&D impairment losses1
(21,600
)
Balance as of December 31, 2015
$
3,200

___________________________
1 
IPR&D impairment losses related to a $3.8 million abandonment of IPR&D and a $17.8 million loss upon an updated fair value analysis of an asset prior to transfer from IPR&D to developed technology.

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.