Goodwill and Other Intangible Assets

Goodwill

Goodwill attributed to our reportable segments are as follows (in thousands):



	November 30, 2015		November 30, 2014
Capital Markets	$	1,653,588	$	1,659,636
Asset Management	3,000		3,000
Total goodwill	$	1,656,588	$	1,662,636

The following table is a summary of the changes to goodwill (in thousands):



	Year Ended November 30, 2015			Year Ended November 30, 2014
Balance, at beginning of period	$	1,662,636		$	1,722,346
Impairment loss (1)	—			(54,000		)
Purchase accounting adjustments (2)	(1,959		)	—
Translation adjustments	(4,089		)	(5,710		)
Balance, at end of period	$	1,656,588		$	1,662,636


(1)	Activity for the year ended November 30, 2014 represents impairment losses of $51.9 million related to our Futures reporting unit and $2.1 million related to our International Asset Management business.

(2)

During the year ended November 30, 2015, we have made correcting adjustments to decrease goodwill by $2.0 million. Goodwill has been overstated in the historical financial statements since the Leucadia Transaction. Financial instruments owned and Accrued expenses and other liabilities have been understated, while the net deferred tax asset and net income tax receivable, both of which are presented within Other assets on the face of the consolidated statements of financial condition, have been overstated. We do not believe this misstatement is material to our financial statements for any previously reported period.

Goodwill Impairment Testing

A reporting unit is an operating segment or one level below an operating segment. The quantitative goodwill impairment test is performed at the level of the reporting unit and consists of two steps. In the first step, the fair value of each reporting unit is compared with its carrying value, including goodwill and allocated intangible assets. If the fair value is in excess of the carrying value, the goodwill for the reporting unit is considered not to be impaired. If the fair value is less than the carrying value, then a second step is performed in order to measure the amount of the impairment loss, if any, which is based on comparing the implied fair value of the reporting unit’s goodwill to the fair value of the net assets of the reporting unit.

Allocated equity plus goodwill and allocated intangible assets are used as a proxy for the carrying amount of each reporting unit. The amount of equity allocated to a reporting unit is based on our cash capital model deployed in managing our businesses, which seeks to approximate the capital a business would require if it were operating independently. Intangible assets are allocated to a reporting unit based on either specifically identifying a particular intangible asset as pertaining to a reporting unit or, if shared among reporting units, based on an assessment of the reporting unit’s benefit from the intangible asset in order to generate results.

Estimating the fair value of a reporting unit requires management judgment. Estimated fair values for our reporting units were determined using a market valuation method that incorporate price-to-earnings and price-to-book multiples of comparable public companies. In addition, as the fair values determined under the market approach represent a noncontrolling interest, we applied a control premium to arrive at the estimated fair value of each reporting unit on a controlling basis. We engaged an independent valuation specialist to assist us in our valuation process at August 1, 2015.

Our annual goodwill impairment testing at August 1, 2015 did not indicate any goodwill impairment in any of our reporting units. Substantially all of our goodwill is allocated to our Investment Banking, Equities, and Fixed Income reporting units for which the results of our assessment indicated that these reporting units had a fair value in excess of their carrying amounts based on current projections. At November 30, 2015, goodwill allocated to these reporting units is $1,653.6 million of total goodwill of $1,656.6 million. For the remaining less significant reporting units, we have used a net asset approach for valuation and the fair value of each of the reporting units is equal to its book value.

Intangible Assets

The following tables present the gross carrying amount, accumulated amortization, net carrying amount and weighted average amortization period of identifiable intangible assets at November 30, 2015 and November 30, 2014 (in thousands):



	November 30, 2015													Weighted average remaining lives (years)
	Gross cost		Disposals (1)			Impairment losses			Accumulated amortization			Net carrying amount		Weighted average remaining lives (years)
Customer relationships	$	127,667	$	—		$	—		$	(34,754	)	$	92,913	12.9
Trade name	131,288		—			—			(10,315		)	120,973		32.3
Exchange and clearing organization membership interests and registrations	14,413		(1,227		)	(1,289		)	—			11,897		N/A
	$	273,368	$	(1,227	)	$	(1,289	)	$	(45,069	)	$	225,783



	November 30, 2014										Weighted average remaining lives (years)
	Gross cost		Impairment losses			Accumulated amortization			Net carrying amount		Weighted average remaining lives (years)
Customer relationships (2)	$	135,926	$	(7,603	)	$	(26,402	)	$	101,921	13.7
Trade name	132,009		—			(6,677		)	125,332		33.3
Exchange and clearing organization membership interests and registrations	14,706		(178		)	—			14,528		N/A
	$	282,641	$	(7,781	)	$	(33,079	)	$	241,781

(1) Activity is related to the sale of certain exchange and clearing organization membership interests in the Futures reporting

unit due to the exit of the business.

(2) Impairment losses are related to the Futures reporting unit. The impairment charge is included within Other expenses in

the Consolidated Statements of Earnings.

We performed our annual impairment testing of intangible assets with an indefinite useful life, which consists of exchange and clearing organization membership interests and registrations, at August 1, 2015. We elected to perform a quantitative assessment of membership interests and registrations that have available quoted sales prices as well as all other membership interests and registrations related to the Bache business. A qualitative assessment was performed on the remainder of our indefinite-life intangible assets. In applying our quantitative assessment, we recognized an impairment loss of $1.3 million on certain exchange memberships based on a decline in fair value at August 1, 2015. With regard to our qualitative assessment of the remaining indefinite-life intangible assets, based on our assessment of market conditions, the utilization of the assets and the replacement costs associated with the assets, we have concluded that it is not more likely than not that the intangible assets are impaired. In applying our quantitative assessment at August 1, 2014 we recognized an impairment loss of $178,000 on certain exchange memberships based on a decline in fair value as observed based on quoted sales prices.

As a result of management’s decisions during the fourth quarter of 2014 to pursue strategic alternatives for our Futures business and to liquidate our International Asset Management business, we performed additional impairment testing of indefinite- and finite-life intangible assets that are associated with those reporting units. Estimating the fair value of customer relationship intangible assets using a discounted cash flow methodology, we recognized impairment losses at November 30, 2014 of $7.5 million and $0.1 million in our Futures business and our International Asset Management business, respectively, which are recognized in Other expenses on the Consolidated Statement of Earnings.

Amortization Expense

For finite life intangible assets, aggregate amortization expense amounted to $12.2 million for the year ended November 30, 2015, $12.8 million for the year ended November 30, 2014, $20.5 million for the nine months ended November 30, 2013 and $0.4 million for the three months ended February 28, 2013. These expenses are included in Other expenses on the Consolidated Statements of Earnings.

The estimated future amortization expense for the five succeeding fiscal years is as follows (in thousands):



Year ended November 30, 2016	$	12,198
Year ended November 30, 2017	12,198
Year ended November 30, 2018	12,198
Year ended November 30, 2019	12,198
Year ended November 30, 2020	12,198