5. GOODWILL

A summary of changes in the Company’s goodwill by reportable segment follows.


	December 31, 2010		Additions and adjustments		Impairments		Currency translation		December 31, 2011
Hudson Asia Pacific	$	1,909	$	—	$	—	$	83	$	1,992
	$	1,909	$	—	$	—	$	83	$	1,992


	December 31, 2009		Additions and adjustments		Impairments		Currency translation		December 31, 2010
Hudson Asia Pacific	$	—	$	1,856	$	—	$	53	$	1,909
	$	—	$	1,856	$	—	$	53	$	1,909

The Company tests goodwill for impairment at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment (referred to as a component). A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available and segment management regularly reviews the operating results of that component.

On October 1, 2011, the Company applied ASU 2011-08, “Testing Goodwill for Impairment” and performed a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value to its China reporting unit where the goodwill was recorded. In the qualitative assessment, the Company considered events and circumstances such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and the trend of cash flows, other relevant company-specific events and the “cushion” between a reporting unit’s fair value and carrying amount in the recent fair value calculation. At the conclusion of its assessment, the Company determined that no impairment of goodwill existed as of October 1, 2011.

For the years ended December 31, 2010 and 2009, to estimate the fair value of a reporting unit, the Company utilized the income approach, a valuation technique which indicates the fair value of the invested capital of a reporting unit based on the value of the cash flows that it is expected to generate in the future. The discounted cash flow method, an application of the income approach, estimates the future cash flows of the reporting unit and discounts these cash flows to their present value equivalents at a rate of return that considers the relative risk of achieving the cash flows and the time value of money. These cash flows indicate the fair value of the invested capital of the reporting unit on a marketable, controlling basis.

The Company also considers the market approach, which indicates the fair value of the invested capital of the Company based on the Company’s market capitalization. We use the quoted market price method to estimate the fair value of the Company based on the quoted market price in the active markets (NASDAQ). We estimate the Company’s market capitalization by multiplying the quoted per share market price multiplied by the number of shares outstanding. As an additional measure, the Company reconciles the aggregate fair value of all of its reporting units, as determined by the discounted cash flow method, with its total market capitalization to determine the reasonableness of the fair value calculations.

In 2010, the Company’s financial results continued the improvement which began in the latter half of 2009. However, business and economic conditions remained mixed. As a result, the Company performed an interim test for impairment of the $1,856 final purchase price payment for its Tong Zhi (Beijing) Consulting Service Ltd. and Guangzhou Dong Li Consulting Ltd. (collectively, “TKA”) acquisition, which was recorded as goodwill at June 30, 2010. At the conclusion of its testing, the Company determined that no impairment of goodwill existed at June 30, 2010. Management updated its testing for impairment as of October 1 (annual impairment date) and confirmed its earlier determination that no impairment of goodwill existed as of October 1, 2010.

In July 2009, the Company paid a $1,669 earn-out payment related to the TKA acquisition, which represented additional purchase price and was recorded as goodwill at June 30, 2009. The prevailing economic conditions at year end 2008 had not sufficiently improved during the first-half of 2009 so the Company updated its step one and step two procedures for the China reporting unit as of June 30, 2009. The Company concluded that the entire amount of recorded goodwill was impaired and consequently recorded an impairment charge of $1,669, which is included in the results for the year ended December 31, 2009 in the accompanying Consolidated Statements of Operations.

The foregoing impairment tests in the determination of the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions that the Company believes to be reasonable based on the existing circumstances. Therefore, any value ultimately derived may differ from the Company’s estimate of fair value.