Impairment Of Goodwill And Long-Lived Assets

12 Months Ended

Dec. 27, 2014

Impairment Of Goodwill And Long-Lived Assets [Abstract]

Impairment Of Goodwill And Long-Lived Assets

NOTE 17. IMPAIRMENT OF GOODWILL AND LONG-LIVED ASSETS

During fiscal year 2014 and 2013 the Company performed qualitative assessment for its annual goodwill and indefinite-lived intangible assets impairment assessment for each of its reporting units and concluded that there is no impairment.

In the third quarter of 2012, the Company experienced weaker quarterly results and lower future projections than previously expected in its Fiber-to-the-Home (“FTTH”) and Wintegra reporting units. This was driven by slower adoption rates of FTTH technology in markets outside of Asia and prolonged weak carrier spending which negatively impacted Wintegra. These circumstances triggered the Company to perform step one of the impairment test in the third quarter of 2012 and we determined that the estimated fair value of the reporting units was lower than their respective carrying values.

The fair values of these reporting units in the third quarter of 2012 were estimated using a discounted cash flow model, or income approach. The discounted cash flows for each reporting unit were based on discrete financial forecasts developed by management for planning purposes.

Cash flows beyond the discrete forecasts were estimated using a terminal value calculation, which incorporated historical and forecasted financial trends for each identified reporting unit and considered terminal growth rates for other publicly traded companies. Future cash flows were discounted to present value by incorporating appropriate present value techniques.

Specifically, the income approach valuations included the following assumptions, which were similar to those used in 2011:


		2012
Discount rate		15%
Terminal growth rate		up to 6%
Tax rate		0-12%
Risk free rate		3%
Beta		1.28

Under step one, the Company estimated that the carrying value of these reporting units exceeded the respective fair values. Thus the Company conducted step two of the test by estimating the fair value of the net assets acquired in these acquisitions, and measuring the estimated fair value of each reporting unit against the carrying value of its net assets. The implied goodwill was then compared to the carrying value of goodwill, resulting in a write-down of $146.3 million for FTTH and $121.3 million for Wintegra.

Also, at the end of the third quarter of 2012, the fair values of acquired intangible assets were calculated using the income approach and determined and recorded impairment charges of $7 million related to purchased intangible assets arising from the acquisition of Wintegra. The main factor contributing to this impairment charge was the reduction of forecasted cash flows as described above.

- 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