Goodwill

The following table sets forth the changes in the carrying amount of goodwill for the six months ended December 31, 2012, prior to the internal reorganization in fiscal 2013:



	ACS			MFS		Total
Balance at July 1, 2012	$	113,471		$	10,180	$	123,651
Goodwill arising from the Micronetics acquisition	46,509			—		46,509
Goodwill adjustment for the KOR acquisition	(701		)	—		(701		)
Balance at December 31, 2012	$	159,279		$	10,180	$	169,459

The goodwill adjustment for the KOR acquisition is the result of changes in fair value estimates derived from additional information obtained during the measurement period which ended December 30, 2012.

Following a series of acquisitions that expanded the Company’s capabilities, the Company initiated a reorganization in fiscal 2013 to group its product and service offerings in order to align itself with the way management currently manages its business. The MCE and MDS reporting units were determined based upon whether discrete financial information is available, if management regularly reviews the operating results of the component, the nature of the products offered to customers and the market characteristics of each reporting unit. As defined by FASB ASC 350 Intangibles-Goodwill and Other “FASB ASC 350”, goodwill is tested for impairment on an interim basis at the occurrence of certain triggering events. Events affecting reporting units such as a change in the composition or carrying amount of its net assets constitute a triggering event and require interim testing of goodwill. In fiscal 2013, the Company performed interim testing on the ACS and MFS reporting units prior to the reorganization on January 1, 2013, which indicated that the fair values of both the ACS and MFS reporting units were in excess of their carrying values, and no impairment charge was recorded.

The Company reviewed its analysis of its internally reorganized business in order to determine its reporting units in accordance with FASB ASC 350. A reporting unit is considered to be an operating segment or one level below an operating segment also known as a component. MCE has four components with discrete financial information available which are reviewed by their segment manager; however, those four components are economically similar in nature and thus have been aggregated into a single reporting unit at the operating segment level. MDS is a sole component and the reporting unit is at the operating segment level.

In fiscal 2013 and after its reorganization, the Company allocated the total carrying value of goodwill to each of the new reporting units based on the relative fair value of the reporting units calculated using a discounted cash flow analysis and in accordance with FASB ASC 350. There was no impairment of goodwill indicated subsequent to the allocation.

The following table summarizes the changes in goodwill after reallocation, for the six months ended June 30, 2013 and fiscal year ended June 30, 2014:



	MCE			MDS		Total
Balance at January 1, 2013	$	135,691		$	33,768	$	169,459
Subsequent recognition of deferred tax assets from the Micronetics acquisition	(376		)	—		(376		)
Subsequent decrease of deferred tax liabilities from the Micronetics acquisition	(414		)	—		(414		)
Other goodwill adjustments from the Micronetics acquisition	(1,118		)	—		(1,118		)
Balance at June 30, 2013	133,783			33,768		167,551
Goodwill adjustments from the Micronetics acquisition	595			—		595
Balance at June 30, 2014	$	134,378		$	33,768	$	168,146

The Company follows FASB ASC 350 in assessing whether the fair value of a reporting unit is less than its carrying amount. As of June 30, 2014, both MCE and MDS had goodwill balances and the annual impairment analysis was performed for each reporting unit in the fourth quarter of fiscal 2014. The results of the Company's step one interim goodwill impairment test indicated that the fair values of the MCE and MDS reporting units were substantially in excess of their carrying values. As such, step two of the goodwill impairment testing was not required. Consistent with prior years, the valuation was based upon a discounted cash flow analysis and corroborated by two market-based analyses: one comparing the trading multiples of public companies in similar lines of business and another based on exchange prices in actual business combinations.

Prior to the end of the August 7, 2013 measurement period for the Micronetics acquisition, the Company recorded a $91 adjustment to goodwill resulting from changes in the fair value estimates derived from additional information gathered subsequent to August 7, 2012. Additionally, the Company adjusted approximately $504 of goodwill which was identified subsequent to the measurement period as a correction of an immaterial error that was offset by deferred income taxes. The Company concluded that the impact of the correction was neither quantitatively nor qualitatively material to its June 30, 2014 consolidated balance sheet nor to each of the prior respective quarter ends’ balance sheets during fiscal 2014.