Goodwill And Other Intangible Assets
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Jun. 30, 2013
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Goodwill And Other Intangible Assets |
NOTE 5 – GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill is required to be evaluated for impairment on an annual basis and between annual tests upon the occurrence of certain events or circumstances. A two-step process is performed to analyze whether or not goodwill has been impaired. Step one is to test for potential impairment, and requires that the fair value of the reporting unit be compared to its book value including goodwill. If the fair value is higher than the book value, no impairment is recognized. If the fair value is lower than the book value, a second step must be performed. The second step is to measure the amount of impairment loss, if any, and requires that a hypothetical purchase price allocation be done to determine the implied fair value of goodwill. This fair value is then compared to the carrying value of goodwill. If the implied fair value is lower than the carrying value, an impairment adjustment must be recorded. During the six-month period ended June 30, 2013, Transition Networks experienced a decrease in year-over-year revenues due primarily to continued slowdown in domestic government spending and a decline in sales of its legacy products. Management is restructuring Transition Networks’ general management and sales leadership to better align its business around strategic objectives and changes in the market. Management continues to evaluate and monitor all key factors affecting the carrying value of the recorded goodwill and long-lived assets. Further adverse changes in the Company's actual or expected operating results, market capitalization, business climate, economic factors or other negative events that may be outside the control of management could result in a material non-cash impairment charge in the future. The changes in the carrying amount of goodwill for the six months ended June 30, 2013 and 2012 by segment is as follows:
The Company’s identifiable intangible assets with finite lives are being amortized over their estimated useful lives and were as follows:
Amortization expense on these identifiable intangible assets was $50,000 and $51,000 in 2013 and 2012, respectively. The amortization expense is included in selling, general and administrative expenses.
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