GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

General

The Company tests goodwill and intangible assets with indefinite lives for impairment annually as of August 1. Additionally, the Company may perform interim tests if an event occurs or circumstances change that could potentially reduce the fair value of a reporting unit or indefinite lived intangible asset below its carrying amount. The carrying value of each reporting unit is determined by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units.

The Company tests goodwill for impairment by either performing a qualitative evaluation or a quantitative test. The qualitative evaluation is an assessment of factors, including reporting unit specific operating results as well as industry, market and general economic conditions, to determine whether it is more likely than not that the fair values of a reporting unit is less than its carrying amount, including goodwill. The Company may elect to bypass this qualitative assessment for some or all of its reporting units and perform a quantitative test.

In order to determine the estimated fair value of our reporting units, the Company considers the discounted cash flow method. INAP has consistently considered this method in its goodwill impairment assessments. The discounted cash flow method is specific to the anticipated future results of the reporting unit. The Company determines the assumptions supporting the discounted cash flow method, including the discount rate, using estimates as of the date of the impairment review. To determine the reasonableness of these assumptions, the Company considered the past performance and empirical trending of results, looked to market and industry expectations used in the discounted cash flow method, such as forecasted revenues and discount rate. The Company used reasonable judgment in developing its estimates and assumptions. The assumptions, inputs and judgments used in performing the valuation analysis are inherently subjective and reflect estimates based on known facts and circumstances at the time we perform the valuation. These estimates and assumptions primarily include, but are not limited to, discount rates; terminal growth rates; projected revenues and costs; earnings before interest, taxes, depreciation and amortization for expected cash flows; market comparables and capital expenditure forecasts. The use of different assumptions, inputs and judgments, or changes in circumstances, could materially affect the results of the valuation.

Goodwill is considered impaired if the carrying amount of the net assets exceeds the fair value of the reporting unit. Impairment, if any, would be recorded in operating income / (loss) and this could result in a material impact to net income / (loss) and income / (loss) per share.

In 2017, the Company adopted the guidance under ASU No. 2017-04: Intangibles - Goodwill and Other: Simplifying the Accounting for Goodwill Impairment (Topic 350) which eliminated step 2 of the goodwill impairment test, which required a hypothetical purchase price allocation to measure goodwill impairment loss as of January 1, 2018. A goodwill impairment loss under the new guidance is instead measured using a single step test based on the amount by which a reporting unit's carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. Based on the Company's impairment test as of August 1, 2019, no impairment of goodwill has been identified.

Year-end Testing

During the fourth quarter of 2019, the Company identified a significant decrease in its share price which was considered an impairment indicator. Consequently, the Company performed another goodwill impairment test as of December 1, 2019. Based on this interim goodwill impairment test, we determined that the carrying amounts for three reporting units exceeded their fair value. Impairment charges were recorded for the Cloud reporting unit within INAP US of $22.9 million and for the Cloud and Ubersmith reporting units within INAP INTL of $21.2 million and $0.9 million, respectively. The goodwill impairment is primarily due to declines in projected revenues and operating results due to increased customer churn and reduced sales projections. In performing the impairment test as of December 1, 2019, the Company utilized discount rates ranging from 12.0% to 16.0% which increased compared to the annual testing as of August 1, 2019 where the discount rates ranged from 8.0% to 13.0%, to reflect changes in market conditions. The Company also reduced long-term growth rate assumptions from 2.0% to 1.0% for some reporting units.

While management believes the assumptions used are reasonable and commensurate with the views of a market participant, changes in key assumptions for these reporting units, including increasing the discount rate, lowering revenue forecasts, lowering the operating margin or lowering long-term growth rate, could result in a future impairment.

During the years ended December 31, 2019 and 2018, our goodwill activity is as follows (in thousands):



	January 1, 2018		Re-allocations			SingleHop Acquisition		December 31, 2018		Impairment			December 31, 2019
Reportable segments:
INAP COLO	$	6,003	$	(6,003	)			$	—	$	—		$	—
INAP CLOUD	44,206		(44,206		)			—		—			—
INAP US			28,118			66,008		94,126		(22,918		)	71,208
INAP INTL			22,091					22,091		(22,091		)	—
Total	$	50,209	$	—		$	66,008	$	116,217	$	(45,009	)	$	71,208

Other Intangible Assets

The Company tests intangible assets with indefinite lives for impairment annually as of August 1. As of August 1, 2019, no impairment was recorded for the intangible assets. The Company may perform interim tests if an event occurs or circumstances change that could potentially reduce the fair value of a reporting unit or indefinite lived intangible asset below its carrying amount.

During the year ended December 31, 2019, we determined that impairment indicators existed, primarily due to declines in projected revenues and operating results which caused us to reassess the recoverability of the carrying amount of our intangible assets. The result of our assessment was that the projected undiscounted net cash flows for the Cloud and Ubersmith reporting units in INAP INTL were below the carrying value of the related assets and accordingly, we recorded an impairment of $12.9 million for Cloud and $1.2 million for Ubersmith. Impairment of $13.1 million was recorded for customer relationships and trade names, and $1.0 million for acquired and developed technology. The estimated useful lives range from 4 years to 30 years.

The components of our amortizing intangible assets, including capitalized software, are as follows (in thousands):



	December 31, 2019					December 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Acquired and developed technology	$	63,866	$	(49,127	)	$	71,586	$	(52,097	)
Customer relationships and trade names	94,555		(62,698		)	110,785		(57,232		)
	$	158,421	$	(111,825	)	$	182,371	$	(109,329	)

Amortization expense for intangible assets during the years ended December 31, 2019, 2018 and 2017 was $13.3 million, $11.1 million and $4.4 million, respectively. As of December 31, 2019, remaining amortization expense is as follows (in thousands):



2020	$	9,919
2021	9,314
2022	7,274
2023	6,619
2024	5,735
Thereafter	7,735
	$	46,596