Intangible Water Assets

The Company has indefinite-lived intangible water assets primarily within its water resource and water storage operations segment. These assets consist primarily of certain water rights, and the exclusive right to use two pipelines that the Company constructed and dedicated to various municipalities. The dedicated pipeline assets are Fish Springs Ranch, which is south of Reno, Nevada, where the Company owns pipeline rights and water credits, and Carson-Lyon, which is in Dayton and Lyon County, Nevada where the Company owns pipeline rights and water rights.

The following details the Company’s carrying amounts of its indefinite-lived intangible assets (in thousands):



	September 30, 2013		December 31, 2012
Pipeline rights and water credits at Fish Springs Ranch	$	83,897	$	84,890
Pipeline rights and water rights at Carson-Lyon	24,076		24,076
Other	16,332		21,072
	$	124,305	$	130,038

In response to specific events and changes in circumstances during the second quarter of 2013, the Company completed impairment testing of its indefinite-lived intangible water assets. The fair value of these assets was calculated using discounted cash flow models that incorporated a wide range of assumptions including asset pricing, price escalation, discount rates, absorption rates, timing of sales, and costs. These models are sensitive to minor changes in any of the input variables. Given the decline in market prices for similar assets, increases in interest rates, and extended timing of expected absorptions, the Company adjusted its assumptions and judgments in the model from prior projections for the intangible assets at Fish Springs and Carson-Lyon. The changes in assumptions and judgments resulted in a fair value of the intangible asset at Fish Springs of approximately $83.9 million compared to its carrying value of $84.9 million resulting in an impairment loss of $993,000 which is reported in the statements of operations within impairment loss on real estate and water assets. The loss was also included in the water resource and water storage operations segment results. This was the second such impairment loss recorded on this asset during the last three years. There were no other impairment losses on any other intangible assets recorded in the period.

Subsequent to the issuance of the Company’s unaudited condensed consolidated financial statements for the quarterly period ended June 30, 2013, the Company discovered that indefinite-lived intangible assets, which should have been presented on a separate line, were inappropriately aggregated and presented within real estate and water assets, net on the consolidated balance sheets as of December 31, 2012. The Company also identified that indefinite-lived intangible assets not subject to amortization were incorrectly disclosed in the footnotes to the consolidated financial statements as of December 31, 2012 as $111.6 million instead of $130 million. At September 30, 2013, the assets have been properly presented as indefinite-lived intangible assets on the consolidated balance sheets for the current period and the December 31, 2012 presentation has been corrected. These errors did not affect consolidated shareholders’ equity, the consolidated statements of operations and comprehensive income or loss, or consolidated cash flows and are not considered to be material to the Company’s previously issued consolidated financial statements.