Intangible Assets and Goodwill

9 Months Ended

Dec. 31, 2012

Intangible Assets And Goodwill Disclosure [Abstract]

5. Intangible Assets and Goodwill

The following table reflects the components of intangible assets as of:



	December 31, 2012			March 31, 2012
Amortizable asset management contracts
Cost	$	205,791		$	206,411
Accumulated amortization	(182,868		)	(172,974		)
Net	22,923			33,437
Indefinite–life intangible assets
U.S. domestic mutual fund management contracts	2,106,351			2,502,351
Permal funds-of-hedge fund management contracts	626,000			947,000
Other fund management contracts	304,377			304,278
Trade names	52,800			69,800
	3,089,528			3,823,429
Intangible assets, net	$	3,112,451		$	3,856,866

As part of Legg Mason's annual impairment testing process, and considering aspects of the modifications to Permal compensation and other arrangements discussed in Note 2, on December 12, 2012, and as updated through December 31, 2012, the Company concluded that the carrying value of two significant indefinite-life fund management contract intangible assets and a trade name asset exceeded their respective fair values, and the assets were impaired by an aggregate amount of $734,000. The impairment charges result from a number of current trends and factors, including (i) a decrease in near-term margin projections; (ii) an increase in the rate used to discount projected future cash flows primarily due to company specific factors including continued market and regulatory influences, continued stock price uncertainty and the ongoing search for a permanent Chief Executive Officer; (iii) recent outflows and related reductions in assets under management; and (iv) a reduction in near-term projected growth rates. These changes resulted in a reduction of the projected cash flows and Legg Mason's overall assessment of fair value of the assets, such that the domestic mutual fund management contracts asset, Permal funds-of-hedge fund management contracts asset, and Permal trade name declined below their carrying values, and accordingly were impaired by $396,000, $321,000, and $17,000, respectively.

Management estimated the fair values of these assets based upon discounted cash flow analyses using unobservable market data inputs, which are Level 3 measurements. The significant assumptions used in these cash flow analyses included projected cash flows and discount rates, summarized as follows:

Projected cash flow growth rates for these assets are most dependent on product investment performance, client AUM flows, and changes in market conditions. Discount rates are also influenced by changes in market conditions, as well as interest rates and other factors. Decreases in the projected cash flow growth rates and/or increases in the discount rates could result in lower fair value measurements and potential additional impairments.

There were no impairments to other indefinite-life intangible assets, amortizable management contracts intangible assets, or goodwill, as of December 31, 2012.

As of December 31, 2012, amortizable asset management contracts are being amortized over a weighted-average remaining life of 2.5 years.

Estimated amortization expense for each of the next five fiscal years is as follows:



Remaining 2013	$	3,505
2014	11,835
2015	2,920
2016	2,663
2017	2,000
Thereafter	—
Total	$	22,923

The change in the carrying value of goodwill is summarized below:



	Gross Book Value			Accumulated Impairment			Net Book Value
Balance as of March 31, 2012	$	2,436,945		$	(1,161,900	)	$	1,275,045
Impact of excess tax basis amortization	(16,189		)	—			(16,189		)
Other, including changes in foreign exchange rates	(10,208		)	—			(10,208		)
Balance as of December 31, 2012	$	2,410,548		$	(1,161,900	)	$	1,248,648

- 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.

+ References+ Details

Projected Cash Flow Growth Rates

Discount Rates

Domestic mutual funds contracts asset

Permal funds-of-hedge funds contracts and trade name assets

(1)% to 17%