Goodwill

The value of our goodwill has historically been derived from the acquisition of MD Office Solutions (“MD Office”) in 2015, Telerhythmics in 2014, and substantially all of the assets of Ultrascan, Inc. (“Ultrascan”) in 2007. On September 10, 2019, Digirad completed its acquisition of ATRM which resulted in the Company recognizing goodwill of $8.2 million. As of December 31, 2019, there was a subsequent measurement of goodwill and a related tax benefit adjustment that resulted in a net adjustment of $3.0 thousand and to the recognized amounts of goodwill resulting from the acquisition of ATRM. Digirad Imaging Solutions and ATRM are the reporting units that carry a goodwill balance of $1.7 million and $8.2 million, respectively .

Changes in the carrying amount of goodwill for the years ended December 31, 2019 and 2018, by reportable segment, are as follows (in thousands):



	Diagnostic Services			Medical Device Sales and Service			Building and Construction ⁽⁴⁾		Total
Balance at December 31, 2017	$	2,393		$	1,098		$	—	$	3,491
Derecognition of DMS Health ⁽¹⁾	—			(1,098		)	—		(1,098		)
Impairment of Telerhythmics	(476		)	—			—		(476		)
Derecognition of Telerhythmics ⁽²⁾	(172		)	—			—		(172		)
Balance at December 31, 2018	1,745			—			—		1,745
Recognition of ATRM ⁽³⁾	—			—			8,233		8,233
Balance at December 31, 2019	$	1,745		$	—		$	8,233	$	9,978


⁽¹⁾	On February 1, 2018, the Company’s MDSS reportable segment ceased to exist as the Company sold its MDSS customer contracts related to the post-warranty service business. As a result, the MDSS reportable segment is reported as discontinued operations in these consolidated financial statements and related notes thereto.


⁽²⁾	On October 31, 2018, the Company entered into a membership interest purchase agreement (the “Telerhythmics Purchase Agreement”) with G Medical Innovations USA, Inc. (“G Medical”), pursuant to which we sold all the outstanding membership interests in Telerhythmics to G Medical.

⁽³⁾

On September 10, 2019, Digirad completed its acquisition of ATRM pursuant to the ATRM Merger Agreement. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of ATRM. As of December 31, 2019, there was a subsequent measurement of goodwill and a related tax benefit adjustment that resulted in a net adjustment of $3.0 thousand to the recognized amounts of goodwill resulting from the acquisition of ATRM.


⁽⁴⁾	See Note 5 Merger, within the notes to our consolidated financial statements for further detail.

Estimating the fair value of the reporting units requires the use of estimates and significant judgments regarding future cash flows that are based on a number of factors including actual operating results, forecasted billings, revenue, and spend targets, discount rate assumptions, and long-term growth rate assumptions. These estimates and judgments could adversely change in future periods and we cannot provide absolute assurance that all of the targets will be achieved, which could lead to future impairment charges.