RNWK » Topics » An impairment in the carrying value of our goodwill or other intangible assets could adversely affect our financial condition and results of operations.

These excerpts taken from the RNWK 10-K filed Mar 2, 2009.
An impairment in the carrying value of our goodwill or other intangible assets could adversely affect our financial condition and results of operations.
 
In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, we are required to annually test goodwill and intangible assets with indefinite lives, including the goodwill associated with past acquisitions and any future acquisitions, to determine if impairment has occurred. Additionally, interim reviews must be performed whenever events or changes in circumstances indicate that impairment may have occurred. If the testing performed indicates that an impairment has occurred, we are required to record a non-cash impairment charge for the difference between the carrying value of the goodwill or other intangible assets and the implied fair value of the goodwill or other intangible assets in the period the determination is made. During the quarter ended December 31, 2008, we revised our long term operating plan. Our operating plan was a significant input in evaluating the fair value of our reporting units for the purpose of assessing goodwill for possible impairment. The expected impact resulting from the significant declines observed in the broader economy during the fiscal fourth quarter of 2008 were reflected in the plan. Additionally, in light of the uncertainty regarding the extent of future economic declines, we applied discount rates in our cash flow analysis that appropriately reflected the possibility that cash flows from future operations may not be fully realized. As a result, we determined that the carrying value for our Games and Technology Products and Solutions reporting units exceeded their respective fair values, indicating that goodwill within each reporting unit was potentially impaired. No impairments were indicated under the first step for our Music and Media Software and Services reporting units. As required, we initiated the second step of the goodwill impairment test for our Games and Technology Products and Solutions reporting units. We determined that the implied fair value of goodwill for our Technology Products and Solutions and Games reporting units was less than the carrying value by approximately $97.0 million and $38.1 million, respectively, which was recorded as an impairment of goodwill during the quarter ended December 31, 2008. The testing of goodwill and other intangible assets for impairment requires us to make significant estimates about our future performance and cash flows, as well as other assumptions. These estimates can be affected by numerous factors, including changes in economic, industry or market conditions, changes in business operations, changes in competition or potential changes in the share price of our common stock and market capitalization. Significant and sustained declines in our stock price and market capitalization, a significant decline in our expected future cash flows or a significant adverse change in our business climate, among other factors, could result in the need to perform an impairment analysis under SFAS No. 142 in future interim periods. We cannot accurately predict the amount and timing of any impairment of goodwill or other intangible asset. Should the value of goodwill or other intangible assets become impaired, we would record the appropriate charge, which could have an adverse effect on our financial condition and results of operations.
 
An
impairment in the carrying value of our goodwill or other
intangible assets could adversely affect our financial condition
and results of operations.



 



In accordance with SFAS No. 142, Goodwill and Other
Intangible Assets
, we are required to annually test goodwill
and intangible assets with indefinite lives, including the
goodwill associated with past acquisitions and any future
acquisitions, to determine if impairment has occurred.
Additionally, interim reviews must be performed whenever events
or changes in circumstances indicate that impairment may have
occurred. If the testing performed indicates that an impairment
has occurred, we are required to record a non-cash impairment
charge for the difference between the carrying value of the
goodwill or other intangible assets and the implied fair value
of the goodwill or other intangible assets in the period the
determination is made. During the quarter ended
December 31, 2008, we revised our long term operating plan.
Our operating plan was a significant input in evaluating the
fair value of our reporting units for the purpose of assessing
goodwill for possible impairment. The expected impact resulting
from the significant declines observed in the broader economy
during the fiscal fourth quarter of 2008 were reflected in the
plan. Additionally, in light of the uncertainty regarding the
extent of future economic declines, we applied discount rates in
our cash flow analysis that appropriately reflected the
possibility that cash flows from future operations may not be
fully realized. As a result, we determined that the carrying
value for our Games and Technology Products and Solutions
reporting units exceeded their respective fair values,
indicating that goodwill within each reporting unit was
potentially impaired. No impairments were indicated under the
first step for our Music and Media Software and Services
reporting units. As required, we initiated the second step of
the goodwill impairment test for our Games and Technology
Products and Solutions reporting units. We determined that the
implied fair value of goodwill for our Technology Products and
Solutions and Games reporting units was less than the carrying
value by approximately $97.0 million and
$38.1 million, respectively, which was recorded as an
impairment of goodwill during the quarter ended
December 31, 2008. The testing of goodwill and other
intangible assets for impairment requires us to make significant
estimates about our future performance and cash flows, as well
as other assumptions. These estimates can be affected by
numerous factors, including changes in economic, industry or
market conditions, changes in business operations, changes in
competition or potential changes in the share price of our
common stock and market capitalization. Significant and
sustained declines in our stock price and market capitalization,
a significant decline in our expected future cash flows or a
significant adverse change in our business climate, among other
factors, could result in the need to perform an impairment
analysis under SFAS No. 142 in future interim periods.
We cannot accurately predict the amount and timing of any
impairment of goodwill or other intangible asset. Should the
value of goodwill or other intangible assets become impaired, we
would record the appropriate charge, which could have an adverse
effect on our financial condition and results of operations.


 




EXCERPTS ON THIS PAGE:

10-K (2 sections)
Mar 2, 2009
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