Goodwill and Intangible Assets

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 equity 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 equity 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.

In the fourth quarter of 2015, the Company assessed the impairment of goodwill and intangible assets as part of its annual assessment and concluded that there was an impairment relating to the goodwill within the Global Execution Services segment. The Company recorded a $0.9 million charge within Writedown of assets and other real estate related charges in the Consolidated Statements of Operations for the year ended December 31, 2015.

As detailed in Footnote 5 “Discontinued Operations, Assets and Liabilities Held for Sale & Sales of Businesses” the Company conducted a strategic review of its businesses and determined that certain of its businesses are no longer considered core to its strategy and the Company is currently seeking the opportunity to exit or divest of these businesses. As a result, the Company recorded a charge of $15.0 million in the Consolidated Statement of Operations for the year ended December 31, 2015 to reflect the excess of carrying value over estimated fair value of intangible assets of businesses held for sale. The $26.0 million estimated fair value of such intangibles are reported within Assets of businesses held for sale on the Consolidated Statement of Financial Condition as of December 31, 2015.

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



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

Intangible assets with definite useful lives are amortized over their remaining estimated 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 December 31, 2015 and December 31, 2014 was approximately three and five years, respectively.

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



	December 31, 2015		December 31, 2014
Market Making ⁽¹⁾
Technology	$	38,151	$	50,542
Trading rights	8,530		44,358
Total	46,681		94,900
Global Execution Services ⁽²⁾
Technology	21,446		18,200
Customer relationships	9,389		10,833
Trade names	750		850
Total	31,585		29,883
Corporate and Other
Technology	5,801		10,500
Total	$	84,067	$	135,283


⁽¹⁾	Excluded from the December 31, 2015 balance is $26.0 million of intangibles related to businesses which meet the requirements to be considered held-for-sale. As noted in Footnote 5 "Discontinued Operations, Assets and Liabilities Held for Sale & Sales of Businesses", such amount is included in Assets of businesses held for sale at December 31, 2015.


⁽²⁾	Excluded from the December 31, 2014 balance is $34.7 million of intangibles related to KCG Hotspot which was held for sale at that time. As noted in Footnote 5 "Discontinued Operations, Assets and Liabilities Held for Sale & Sales of Businesses", such amount is included in Assets of businesses held for sale at December 31, 2014.



		December 31, 2015			December 31, 2014
Technology ⁽¹⁾	Gross carrying amount	$	120,256		$	115,804
	Accumulated amortization	(54,858		)	(36,562		)
	Net carrying amount	65,398			79,242
Trading rights ⁽²⁾	Gross carrying amount	9,209			62,468
	Accumulated amortization	(679		)	(18,110		)
	Net carrying amount	8,530			44,358
Customer relationships ⁽³⁾	Gross carrying amount	13,000			13,000
	Accumulated amortization	(3,611		)	(2,167		)
	Net carrying amount	9,389			10,833
Trade names ⁽⁴⁾	Gross carrying amount	1,000			1,000
	Accumulated amortization	(250		)	(150		)
	Net carrying amount	750			850
Total	Gross carrying amount	143,465			192,272
	Accumulated amortization	(59,398		)	(56,989		)
	Net carrying amount	$	84,067		$	135,283

⁽¹⁾

The weighted average remaining life for technology, including capitalized internal use software, was approximately two and three years as of December 31, 2015 and December 31, 2014, respectively. Excluded from the December 31, 2015 balance is $8.8 million of technology assets related to Assets of businesses held for sale. Excluded from the December 31, 2014 balance is $13.1 million of technology assets related to KCG Hotspot which as noted in Footnote 5 "Discontinued Operations, Assets and Liabilities Held for Sale & Sales of Businesses", is included in Assets of businesses 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 five and seven years as of December 31, 2015 and December 31, 2014, respectively. As of December 31, 2015 and December 31, 2014, $6.9 million of trading rights had indefinite useful lives. Excluded from the December 31, 2015 balance is $17.2 million of trading rights related to Assets of businesses held for sale.

⁽³⁾

Customer relationships relate to KCG BondPoint. The weighted average remaining life was approximately 7 and 8 years as of December 31, 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 5 "Discontinued Operations, Assets and Liabilities Held for Sale & Sales of Businesses", is included in Assets of businesses held for sale at December 31, 2014.

⁽⁴⁾

Trade names relate to KCG BondPoint. The weighted average remaining life was approximately 7 and 8 years as of December 31, 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 5 "Discontinued Operations, Assets and Liabilities Held for Sale & Sales of Businesses", is included in Assets of businesses 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 year ended December 31,
	2015		2014		2013
Amortization expense	$	35,244	$	35,592	$	19,211

As of December 31, 2015, the following table summarizes the Company’s estimated amortization expense for future periods (in thousands):



	Amortization expense
For the year ended December 31, 2016	$	28,739
For the year ended December 31, 2017	27,381
For the year ended December 31, 2018	15,127
For the year ended December 31, 2019	1,751
For the year ended December 31, 2020	1,659