Goodwill, Purchased Intangibles, and Software Development Costs

12 Months Ended

Dec. 31, 2015

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill, Purchased Intangibles, and Software Development Costs

5. Goodwill, Purchased Intangibles, and Software Development Costs

Polycom’s business is organized around four major geographic theaters: North America, Caribbean and Latin America (“CALA”), Europe, Middle East and Africa (“EMEA”) and Asia Pacific (“APAC”), which are considered its reporting units.

In the fourth quarter of 2015, the Company performed the qualitative assessment for its four reporting units. For each reporting unit, the Company weighed the relative impact of factors that are specific to the reporting unit as well as industry and macroeconomic factors. The reporting unit specific factors that were considered included the results of the most recent impairment tests, as well as financial performance and changes to the reporting units’ carrying amounts since the most recent impairment tests. For the industry in which the reporting units operate, the Company considered growth projections from independent sources and significant developments or transactions within the industry during 2015, where applicable. The Company also determined that macroeconomic factors during 2015 did not have a significant impact on the discount rates and growth rates used for the valuation performed. Based on the qualitative assessment, the Company concluded that for the four reporting units, it was more likely than not that the fair value of each reporting unit exceeded its carrying amount and there was no indication of impairment. As a result, performing the two-step impairment test was unnecessary and that no impairment charge was recognized for 2015.

The following table summarizes the changes in carrying amount of goodwill in each of the Company’s segments for the periods presented (in thousands):

	Segments
	Americas		EMEA		APAC			Total
Balance at December 31, 2013	$	308,159	$	101,882	$	149,419		$	559,460
Foreign currency translation		—		—		(229	)		(229	)
Balance at December 31, 2014		308,159		101,882		149,190			559,231
Foreign currency translation		—		—		(456	)		(456	)
Balance at December 31, 2015	$	308,159	$	101,882	$	148,734		$	558,775

The following table sets forth details of the Company’s total purchased intangible assets and capitalized software development costs for products to be sold as of the following periods (in thousands):

	December 31, 2015							December 31, 2014
	Gross Value		Accumulated Amortization & Impairment			Net Value		Gross Value		Accumulated Amortization & Impairment			Net Value
Core and developed technology	$	81,178	$	(80,945	)	$	233	$	81,178	$	(79,986	)	$	1,192
Customer and partner relationships		79,525		(66,742	)		12,783		79,525		(57,983	)		21,542
Non-compete agreements		1,800		(1,700	)		100		1,800		(1,100	)		700
Trade name		3,400		(3,369	)		31		3,400		(3,229	)		171
Other		4,462		(4,462	)		—		4,462		(4,418	)		44
Finite-lived intangible assets		170,365		(157,218	)		13,147		170,365		(146,716	)		23,649
Indefinite-lived trade name		918		—			918		918		—			918
Total acquired intangible assets	$	171,283	$	(157,218	)	$	14,065	$	171,283	$	(146,716	)	$	24,567
Capitalized software development costs for products to be sold	$	12,993	$	(5,002	)	$	7,991	$	7,416	$	(1,900	)	$	5,516

The Company determined that a purchased trade name intangible of $0.9 million had an indefinite life as the Company expects to generate cash flows related to this asset indefinitely. No impairment charges related to the Company’s purchased intangible assets were recognized in the years ended December 31, 2015, 2014, and 2013.

The following table summarizes amortization expense recorded in the following periods (in thousands):

	Year Ended December 31,
	2015		2014		2013
Amortization of purchased intangibles in revenues	$	51	$	75	$	75
Amortization of purchased intangibles in cost of product revenues		956		3,035		9,361
Amortization of purchased intangibles in operating expenses		9,495		9,781		10,389
Total amortization expenses of purchased intangibles	$	10,502	$	12,891	$	19,825

Amortization expense of purchased intangibles is not allocated to the Company’s operating segments.

The estimated future amortization expense of purchased intangible assets as of December 31, 2015 is as follows (in thousands):

Year ending December 31,	Amount
2016	$	8,478
2017		4,669
2018		—
2019		—
2020		—
Total	$	13,147

- Definition

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.

+ References + Details