Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2017

Goodwill And Intangible Assets Disclosure [Abstract]

4. Goodwill and Intangible Assets

Goodwill and intangible assets consist of the following:

	December 31, 2017							December 31, 2016
	Gross							Gross
	Carrying		Accumulated			Intangible		Carrying		Accumulated			Intangible
(In thousands)	Amount		Amortization			Assets, Net		Amount		Amortization			Assets, Net
Intangibles subject to amortization:
Proprietary technology	$	695,354	$	(405,114	)	$	290,240	$	627,819	$	(347,477	)	$	280,342
Customer contracts and relationships		922,492		(464,860	)		457,632		813,021		(430,960	)		382,061
Total	$	1,617,846	$	(869,974	)	$	747,872	$	1,440,840	$	(778,437	)	$	662,403

Intangibles not subject to amortization:
Registered trademarks						$	79,000						$	79,000
Goodwill							2,004,953							1,924,052
Total						$	2,083,953						$	2,003,052

We performed our annual impairment tests of our reporting units as of October 1, 2017. During the year ended December 31, 2017, the annual impairment testing date of the Netsmart reporting unit was changed to October 1, 2017 to coincide with Allscripts annual testing date. The prior annual impairment testing date for the Netsmart unit was December 31, 2016. The fair value of each reporting unit substantially exceeded its carrying value and no indicators of impairment were identified. All of the impairment tests performed during 2017 consisted of quantitative analyses.

We determined the fair value of each of our reporting units using both a discounted cash flow analysis and a market approach considering benchmark company market multiples. A discount rate of 9% was applied to the cash flows used in the discounted cash flow analysis. We also considered our market capitalization as of the date of each test.

There were no accumulated impairment losses associated with our goodwill as of December 31, 2017 or 2016, and no impairments were recorded during the years ended December 31, 2017, 2016 and 2015. Changes in the carrying amounts of goodwill by reportable segment for the years ended December 31, 2017 and 2016 were as follows:

	Clinical and			Population
(In thousands)	Financial Solutions			Health			Netsmart		Total
Balance as of December 31, 2015	$	796,367		$	426,234		$	0	$	1,222,601
Additions arising from business acquisitions:
Netsmart		0			0			619,283		619,283
HealthMEDX		0			0			18,457		18,457
Other additions		49,093			16,241			0		65,334
Total additions to goodwill		49,093			16,241			637,740		703,074
Reallocation		0			(37,600	)		37,600		0
Foreign exchange translation		(1,623	)		0			0		(1,623	)
Balance as of December 31, 2016	$	843,837		$	404,875		$	675,340	$	1,924,052
Additions arising from business acquisitions:
DeVero acquisition		0			0			32,363		32,363
Nanthealth provider/patient solutions business		0			13,350			0		13,350
Enterprise Information Solutions business		16,367			12,860			0		29,227
Other additions		420			47			4,503		4,970
Total additions to goodwill		16,787			26,257			36,866		79,910
Foreign exchange translation		991			0			0		991
Balance as of December 31, 2017	$	861,615		$	431,132		$	712,206	$	2,004,953

Other additions during the years ended December 31, 2017 and 2016 relate to goodwill arising from our acquisition of several third parties in late 2016, including measurement period adjustments, and Netsmart’s Asset Purchase Agreement with a third party during March 2017. The goodwill reallocation during the year ended December 31, 2016 relates to the allocation of goodwill associated with our Homecare^TM business during the second quarter of 2016 as a result of the Netsmart Transaction. Refer to Note 2, “Business Combinations and Other Investments,” for additional information regarding these acquisitions.

Intangible assets are being amortized over their estimated useful lives and amortization expense related to intangible assets was as follows:

	Year Ended December 31,
(In thousands)	2017		2016		2015
Proprietary technology amortization included in cost of revenue	$	57,517	$	45,357	$	35,144
Intangible amortization included in operating expenses		33,754		25,847		23,172
Total intangible amortization expense	$	91,271	$	71,204	$	58,316

The increase in amortization expense for the year ended December 31, 2017 compared with the year ended December 31, 2016 was primarily driven by acquisitions completed during 2017. The increase in amortization expense for the year ended December 31, 2016 compared with the year ended December 31, 2015 was primarily driven by acquisitions completed during 2016, partly offset by amortization associated with intangible assets that were fully amortized in the second half of 2015. Estimated future amortization expense for the intangible assets that exist as of December 31, 2017, based on foreign currency exchange rates in effect as of such date, is as follows:


Year Ended December 31,	(In thousands)
2018	$	106,859
2019		105,191
2020		100,509
2021		91,428
2022		79,315
Thereafter		264,570
Total	$	747,872

- 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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