Goodwill And Intangible Assets, Net

12 Months Ended

Jun. 30, 2012

Goodwill And Intangible Assets, Net [Abstract]

9. GOODWILL AND INTANGIBLE ASSETS, net

Goodwill

Summarized below is the movement in the carrying value of goodwill for the years ended June 30, 2012, 2011 and 2010:


		Carrying
		value
Balance as of July 1, 2009	$	116,197
Acquisitions		1,187
Impairment of goodwill		(37,378	)
Foreign currency adjustment ⁽¹⁾		(3,660	)
Balance as of June 30, 2010	$	76,346
Acquisition of KSNET (Note 3) ⁽²⁾		120,139
Foreign currency adjustment ⁽¹⁾		13,085
Balance as of June 30, 2011		209,570
Reduction in goodwill related to net settlement (Note 3)		(4,239	)
Foreign currency adjustment ⁽¹⁾		(22,594	)
Balance as of June 30, 2012	$	182,737

(1) – the foreign currency adjustment represents the effects of the fluctuations between the South African rand and the Korean won, and the US dollar on the carrying value.

(2) – represents goodwill arising from the acquisition of KSNET. This goodwill has been allocated to the international transaction-based activities operating segment (see Note 3).

Goodwill associated with the acquisition of KSNET represents the excess of cost over the fair value of acquired net assets. The KSNET goodwill is not deductible for tax purposes. See Note 3 for the allocation of the purchase price to the fair value of acquired net assets.

The Company assesses the carrying value of goodwill for impairment annually, or more frequently, whenever events occur and circumstances change indicating potential impairment. The Company performs its annual impairment test as at June 30 of each year. The results of our impairment tests during the year ended June 30, 2012 and 2011, indicated that the fair value of the Company's reporting units exceeded their carrying values and therefore the Company's reporting units were not at risk of potential impairment.

Goodwill has been allocated to the Company's reportable segments as follows:


	2012		2011

South African transaction-based activities	$	34,692	$	42,005
International transaction-based activities		111,798		124,895
Smart card accounts		-		-
Financial services		-		-
Hardware, software and related technology sales		36,247		42,670
Total	$	182,737	$	209,570

Intangible assets, net

Impairment loss

The Company assesses the carrying value of intangible assets for impairment whenever events occur or circumstances change indicating that the carrying amount of the intangible asset may not be recoverable. During the year ended June 30, 2011, one of Net1 UTA's largest customers advised the Company of its intention to transition to an alternative payment platform. As a consequence of this development, as well as deteriorating trading conditions and uncertainty surrounding the timing and quantum of future net cash inflows, the Company reviewed customer relationships acquired as part of the Net1 UTA acquisition for impairment. As a result of this review, the Company recognized an impairment loss of $41.8 million during its third quarter of fiscal 2011 related to the entire carrying value of customer relationships acquired in the Net1 UTA acquisition in August 2008. In addition, the Company reversed the deferred tax liability of $10.4 million associated with this intangible asset.

The impairment loss recognized was allocated to the Company's hardware, software and related technology sales operating segment.

Intangible assets acquired

Summarized below is the fair value of intangible assets acquired, translated at the exchange rate applicable as of the relevant acquisition dates, and the weighted-average amortization period:


			Weighted-
		Fair value	Average
		as of	Amortization
		acquisition	period (in
		date	years)
Finite-lived intangible asset:
KSNET customer relationships	$	74,663	10
FIHRST customer relationships		1,804	10
Net1 UTA customer relationships (1)		68,859	7
Prepaid business customer relationships		895	0.75
KSNET software and unpatented technology		24,380	5
FIHRST software and unpatented technology		6,179	3
MediKredit software and unpatented technology		5,249	3
Prepaid business software and unpatented technology		2,449	3
KSNET trademarks		3,786	8
MediKredit customer database	$	821	3

(1)	Impaired during the year ended June 30, 2011

The Company recognized a deferred tax liability of approximately $0.2 million related to the acquisition of the prepaid business customer relationships during the year ended June 30, 2012.The Company recognized a deferred tax liability of approximately $24.5 million related to the acquisition of the KSNET intangible assets during the year ended June 30, 2011. The Company recognized a deferred tax asset of approximately $0.4 million related to the acquisition of the FIHRST software and a deferred tax liability of approximately $2.7 million related to the MediKredit and the remaining FIHRST intangible assets during the year ended June 30, 2010.

Summarized below is the carrying value and accumulated amortization of intangible assets as of June 30, 2012 and 2011:


As of June 30, 2012							As of June 30, 2011
	Gross carrying value		Accumulated amortization			Net carrying value		Gross carrying value		Accumulated amortization			Net carrying value
Finite-lived intangible assets:
Customer relationships(1)	$	91,692	$	(22,617	)	$	69,075	$	100,155	$	(15,283	)	$	84,872
Software and unpatented technology(1)		36,082		(15,968	)		20,114		37,697		(8,999	)		28,698
FTS patent		4,623		(4,623	)		-		5,598		(5,598	)		-
Exclusive licenses		4,506		(4,506	)		-		4,506		(4,506	)		-
Trademarks		7,125		(2,507	)		4,618		8,130		(2,288	)		5,842
Customer database		734		(611	)		123		888		(444	)		444
Total finite-lived intangible assets	$	144,762	$	(50,832	)	$	93,930	$	156,974	$	(37,118	)	$	119,856

(1) June 30, 2012 balances include the customer relationships and software and unpatented technology acquired as part of the prepaid business acquisition in October 2011;

Amortization expense charged for the years to June 30, 2012, 2011 and 2010 was $19.4 million, $22.5 million, and $15.2 million, respectively.

Future estimated annual amortization expense for the next five fiscal years, assuming exchange rates prevailing on June 30, 2012, is presented in the table below. Actual amortization expense in future periods could differ from this estimate as a result of acquisitions, changes in useful lives, exchange rate fluctuations and other relevant factors.


2013	$	16,961
2014		14,678
2015		14,614
2016		10,769
2017		8,506
Thereafter	$	28,402

- 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.

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