2. Balance Sheet Details

Property and Equipment, net

Property and equipment, net, consisted of the following (in thousands, except years):

		December 31,
	Useful Life	2016			2015
Instrument sets	4	$	249,592		$	214,893
Machinery and equipment	5 to 7		37,837			26,871
Computer equipment and software	3 to 7		71,258			55,480
Leasehold improvements	2 to 15		21,278			17,331
Furniture and fixtures	3 to 7		7,625			5,884
Building and improvements	10 to 20		16,558			10,875
Land	—		541			1,288
			404,689			332,622
Less: accumulated depreciation and amortization			(223,165	)		(191,181	)
		$	181,524		$	141,441

Property and equipment mainly consisted of instrument sets, which are loaned to surgeons and hospitals that purchase implants, biologics and disposables for use in individual surgical procedures.

Depreciation expense was $57.1 million, $49.8 million, and $52.3 million for the years ended December 31, 2016, 2015 and 2014, respectively. At December 31, 2016 and 2015, gross assets recorded under capital leases of $1.5 million are included in machinery and equipment. Depreciation of the assets under capital leases is included in depreciation expense. The Company depreciates leasehold improvements over their estimated useful lives or the term of the applicable lease, whichever is shorter.

Included in business transition costs, in the Consolidated Statements of Operations, during the year ended December 31, 2014 was $4.2 million of accelerated depreciation resulting from the Company’s consolidation of its offices located in San Diego, California into one corporate headquarters. This project commenced during the year ended December 31, 2014 and completed in 2015. As a result, certain long-lived assets, primarily leasehold improvements, were abandoned and replaced during the respective construction period. In accordance with the authoritative guidance, the Company shortened the depreciable lives of the impacted assets, which resulted in $4.2 million of accelerated depreciation, which was included in total operating expenses, during the year ended December 31, 2014, that would have otherwise been recorded in future periods. There is no impact to the Company’s Consolidated Statements of Operations over the life of the respective assets. The net effect of this change in estimate on net income and earnings per share for the year ended December 31, 2014 was $1.8 million and $0.04, respectively. No accelerated depreciation was recorded in 2016 or 2015.

Capitalized internal-use software costs include only those direct costs associated with the actual development or acquisition of computer software for internal use, including costs associated with the design, coding, installation, and testing of the system. At December 31, 2016 and 2015, the Company had $24.2 million and $17.6 million in unamortized capitalized internal-use software costs, respectively. Amortization expense related to capitalized internal-use software costs was $7.4 million, $7.3 million and $7.7 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Goodwill and Intangible Assets

Goodwill and intangible assets as of December 31, 2016 consisted of the following (in thousands, except years):

	Weighted-
	Average
	Amortization
	Period	Gross		Accumulated			Intangible
	(in years)	Amount		Amortization			Assets, net
Intangible Assets Subject to Amortization:
Developed technology	8	$	247,148	$	(66,833	)	$	180,315
Manufacturing know-how and trade secrets	13		20,572		(13,604	)		6,968
Trade name and trademarks	9		25,200		(7,478	)		17,722
Customer relationships	9		117,018		(30,880	)		86,138
Total intangible assets subject to amortization	9	$	409,938	$	(118,795	)	$	291,143
Intangible Assets Not Subject to Amortization:
Goodwill								485,685
Total goodwill and intangible assets, net							$	776,828

Goodwill and intangible assets as of December 31, 2015 consisted of the following (in thousands, except years):

	Weighted-
	Average
	Amortization
	Period	Gross		Accumulated			Intangible
	(in years)	Amount		Amortization			Assets, net
Intangible Assets Subject to Amortization:
Developed technology	9	$	92,648	$	(37,382	)	$	55,266
Manufacturing know-how and trade secrets	12		21,787		(13,296	)		8,491
Trade name and trademarks	11		9,500		(5,068	)		4,432
Customer relationships	8		44,752		(27,865	)		16,887
Total intangible assets subject to amortization	10	$	168,687	$	(83,611	)	$	85,076
Intangible Assets Not Subject to Amortization:
Goodwill								154,281
Total goodwill and intangible assets, net							$	239,357

Total expense related to the amortization of intangible assets which is recorded in both cost of goods sold and operating expenses in the Consolidated Statements of Operations depending on the functional nature of the intangible, was $45.6 million, $16.1 million and $13.6 million for the years ended December 31, 2016, 2015 and 2014, respectively.

During the year ended December 31, 2016, in connection with acquisitions and other investments, the Company recorded additions to definite-lived intangible assets and goodwill of $241.3 million and $330.5 million, respectively. Goodwill recorded in business combinations is primarily attributable to synergies expected to arise after the acquisition. See Note 5 to the Consolidated Financial Statements included in this Annual Report for further discussion on assets acquired in business combinations and asset acquisitions.

The changes to goodwill are comprised of the following (in thousands):

(in thousands)
December 31, 2015
Gross goodwill	$	162,581
Accumulated impairment loss		(8,300	)
		154,281
Changes to gross goodwill
Increases recorded in business combinations		330,488
Changes resulting from foreign currency fluctuations		916
		331,404
December 31, 2016
Gross goodwill		493,985
Accumulated impairment loss		(8,300	)
	$	485,685

Total future amortization expense related to intangible assets subject to amortization at December 31, 2016 is set forth in the table below (in thousands):


2017	$	48,751
2018		46,658
2019		44,973
2020		44,517
2021		42,598
Thereafter through 2026		63,646
Total future amortization expense	$	291,143

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consisted of the following (in thousands):

	December 31,
	2016		2015
Accrued expenses	$	42,355	$	31,187
Accounts payable		9,121		6,792
Distributor commissions payable		8,836		8,502
Other taxes payable		7,789		6,386
Royalties payable		4,877		4,454
Others		4,607		3,665
Accounts payable and accrued liabilities	$	77,585	$	60,986