Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Note 6—Goodwill and Intangible Assets

The following table summarizes the changes in the carrying amount of goodwill for the periods indicated (in thousands):

	Year Ended   December 31,
	2019			2018
Balance as of the beginning of the period	$	37,482		$	38,541
Business combination	101,703			—
Foreign currency translation adjustments	(454		)	(1,059		)
Balance as of the end of the period	$	138,731		$	37,482

The Company has determined it has two operating segments, Etsy and Reverb, which qualify for aggregation as one reportable segment, for purposes of allocating resources and evaluating financial performance. As a result, the Company has determined it has two reporting units to test for goodwill impairment during the fourth quarter. The Company did not recognize any goodwill impairments during the years ended December 31, 2019, 2018, and 2017.

At December 31, 2019 and 2018, the gross book value and accumulated amortization of intangible assets were as follows (in thousands):

	As of December 31, 2019										As of December 31, 2018
	Gross book value		Accumulated amortization			Foreign currency translation			Net book value		Gross book value		Accumulated amortization			Foreign currency translation			Net book value
Customer relationships	$	93,500	$	(2,338	)	$	—		$	91,162	$	—	$	—		$	—		$	—
Trademark	79,400		(1,985		)	—			77,415		—		—			—			—
Referral agreement	37,127		(5,417		)	(1,356		)	30,354		35,323		(1,890		)	(712		)	32,721
Technology	7,200		(7,200		)	—			—		7,200		(5,500		)	—			1,700
Patent licenses	332		(27		)	—			305		172		(4		)	—			168
Intangible assets, net	$	217,559	$	(16,967	)	$	(1,356	)	$	199,236	$	42,695	$	(7,394	)	$	(712	)	$	34,589

The Company acquired intangible assets valued at $172.9 million in the Reverb acquisition on August 15, 2019. As part of the acquisition, the Company recorded acquired intangible assets for customer relationships and trademark. These are both amortized on a straight-line basis over a period of 15 years. See “Note 5—Business Combinations” for additional information on the acquisition of Reverb.

On June 15, 2018, the Company entered into a referral agreement with DaWanda GmbH (“DaWanda”), a privately held Germany-based marketplace for gifts and handmade items. As part of this agreement, DaWanda agreed to encourage its community of buyers and sellers to migrate to the Etsy platform. DaWanda wound down its operations and shut down its site on August 30, 2018. Etsy did not acquire any of DaWanda’s assets, liabilities, or employees as part of this agreement. The Company accounted for the agreement as an asset acquisition and the referral agreement intangible asset is amortized on a straight-line basis over a period of 10 years.

Amortization expense for the years ended December 31, 2019, 2018, and 2017 was $9.6 million, $4.3 million, and $3.4 million, respectively.

The Company did not recognize any intangible asset impairment losses in the years ended December 31, 2019, 2018, and 2017.

Based on amounts recorded at December 31, 2019, the Company estimates intangible asset amortization expense in each of the years ending December 31 as follows (in thousands):

2020	$	15,148
2021	15,148
2022	15,148
2023	15,148
2024	15,148
Thereafter	123,496
Total amortization expense	$	199,236