Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and intangible assets with indefinite lives are assessed for impairment annually or when events indicate that the amounts may be impaired. The Company assesses goodwill for impairment at the reporting unit level. The Company’s reporting units are the components of its business segments for which discrete financial information is available and is regularly reviewed by the Company’s management. As part of the assessment for impairment, the Company considers the cash flows of the respective reporting unit and assesses the fair value of the respective reporting unit as well as the overall market value of the Company compared to its net book value. The assessment of fair value of the reporting units is principally performed using a discounted cash flow methodology with a risk-adjusted weighted average cost of capital which the Company believes to be the most reliable indicator of the fair values of its respective reporting units. The Company also assesses the fair value of each reporting unit based upon its estimated market value and assesses the Company’s overall market value based upon the market price of KCG Class A Common Stock.

Intangible assets are assessed for recoverability when events or changes in circumstances indicate that the carrying amount of the asset or asset group may not be recoverable. The Company assesses intangible assets for impairment at the “asset group” level which is the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. As part of the assessment for impairment, the Company considers the cash flows of the respective asset group and assesses the fair value of the respective asset group. Step one of the impairment assessment for intangibles is performed using undiscounted cash flow models, which indicates whether the future cash flows of the asset group are sufficient to recover the book value of such asset group. When an asset is not considered to be recoverable, step two of the impairment assessment is performed using a discounted cash flow methodology with a risk-adjusted weighted average cost of capital to determine the fair value of the intangible asset group. In cases where amortizable intangible assets and goodwill are assessed for impairment at the same time, the amortizable intangibles are assessed for impairment prior to goodwill being assessed.

No events occurred in the six months ended June 30, 2015 or 2014 that would indicate that the carrying amounts of the Company’s goodwill or intangible assets may not be recoverable. In the fourth quarter of 2014, the Company assessed the impairment of goodwill and intangible assets as part of its annual assessment and concluded that there was no impairment.

The following table summarizes the Company’s goodwill by segment (in thousands):



	June 30, 2015		December 31, 2014
Market Making	$	16,404	$	16,404
Global Execution Services	907		907
Total	$	17,311	$	17,311

Intangible assets with definite useful lives are amortized over their estimated remaining useful lives, the majority of which have been determined to range from one to eight years. The weighted average remaining life of the Company’s intangible assets with definite useful lives at June 30, 2015 and December 31, 2014 was approximately four and five years, respectively.

The following tables summarize the Company’s Intangible assets, net of accumulated amortization by segment and type (in thousands):



	June 30, 2015		December 31, 2014
Market Making
Technology	$	49,951	$	50,542
Trading rights	42,025		44,358
Total	91,976		94,900
Global Execution Services ⁽¹⁾
Technology	15,600		18,200
Customer relationships	10,111		10,833
Trade names	800		850
Total	26,511		29,883
Corporate and Other
Technology	9,000		10,500
Total	$	127,487	$	135,283


⁽¹⁾	Excluded from the December 31, 2014 balance is $34.7 million of intangibles related to the KCG Hotspot which was held for sale at that time. As noted in Footnote 4 "Sales of Businesses", such amount is included in Assets of business held for sale at December 31, 2014.



		June 30, 2015			December 31, 2014
Technology ⁽¹⁾	Gross carrying amount	$	124,305		$	115,804
	Accumulated amortization	(49,754		)	(36,562		)
	Net carrying amount	74,551			79,242
Trading rights ⁽²⁾	Gross carrying amount	62,468			62,468
	Accumulated amortization	(20,443		)	(18,110		)
	Net carrying amount	42,025			44,358
Customer relationships ⁽³⁾	Gross carrying amount	13,000			13,000
	Accumulated amortization	(2,889		)	(2,167		)
	Net carrying amount	10,111			10,833
Trade names ⁽⁴⁾	Gross carrying amount	1,000			1,000
	Accumulated amortization	(200		)	(150		)
	Net carrying amount	800			850
Total	Gross carrying amount	200,773			192,272
	Accumulated amortization	(73,286		)	(56,989		)
	Net carrying amount	$	127,487		$	135,283

⁽¹⁾

The weighted average remaining life for technology, including capitalized internal use software, was approximately two and three years as of June 30, 2015 and December 31, 2014, respectively. Excluded from the December 31, 2014 balance is $13.1 million of technology assets related to KCG Hotspot which as noted in Footnote 4 "Sales of Businesses", is included in Assets of business held for sale at December 31, 2014.


⁽²⁾	Trading rights provide the Company with the rights to trade on certain exchanges. The weighted average remaining life of trading rights with definite useful lives was approximately six and seven years as of June 30, 2015 and December 31, 2014, respectively. As of June 30, 2015 and December 31, 2014, $6.8 million of trading rights had indefinite useful lives.

⁽³⁾

Customer relationships relate to KCG BondPoint. The weighted average remaining life was approximately 7 and 8 years as of June 30, 2015 and December 31, 2014, respectively. Lives may be reduced depending upon actual retention rates. Excluded from the December 31, 2014 balance is $19.0 million of customer relationships related to KCG Hotspot which as noted in Footnote 4 "Sales of Businesses", is included in Assets of business held for sale at December 31, 2014.


⁽⁴⁾	Trade names relate to KCG BondPoint. The weighted average remaining life was approximately 8 and 9 years as of June 30, 2015 and December 31, 2014, respectively. Excluded from the December 31, 2014 balance is $2.6 million of the trade name related to KCG Hotspot which as noted in Footnote 4 "Sales of Businesses", is included in Assets of business held for sale at December 31, 2014.

The following table summarizes the Company’s amortization expense from continuing operations relating to Intangible assets (in thousands):



	For the three months ended June 30,				For the six months ended June 30,
	2015		2014		2015		2014
Amortization expense	$	8,317	$	8,732	$	17,566	$	17,226

As of June 30, 2015, the following table summarizes the Company’s estimated amortization expense for future periods (in thousands):



	Amortization expense
For the six months ended December 31, 2015	$	16,594
For the year ended December 31, 2016	32,856
For the year ended December 31, 2017	30,075
For the year ended December 31, 2018	16,763
For the year ended December 31, 2019	6,211

- 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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