Intangible Assets and Goodwill

The Company owns the following intangible assets, which primarily represent indefinite-lived intangible water assets within its water resource and water storage operations segment (in thousands):



	September 30, 2016		December 31, 2015
Pipeline rights and water credits at Fish Springs Ranch	$	83,897	$	83,897
Pipeline rights and water rights at Carson-Lyon	25,569		24,831
Other, net of accumulated amortization	17,453		17,805
Total intangible assets	$	126,919	$	126,533

Impairment Losses for the Nine Months Ended September 30, 2016:

There were no impairment losses recognized on intangible assets during the nine months ended September 30, 2016.

Impairment Losses for the Year Ended December 31, 2015:

As a result of the Company’s annual review of indefinite-lived intangible assets, using a discounted cash flow model, the Company recorded an impairment loss of $269,000, reducing the carrying value to $3 million, which is included in the table above within other, net of accumulated amortization. The loss was recorded in the consolidated statements of operations and comprehensive income or loss within impairment loss on intangible and long-lived assets and was reported in the water resource and water storage operations segment results.

Goodwill:

The Company had a goodwill balance of $4.2 million at December 31, 2015. During the three and nine months ended September 30, 2016, the Company recorded an impairment loss of $4.2 million on goodwill related to the Citizens Homes, Inc. (“Citizens”) acquisition due to revised financial forecasts for the Southeast operations as a result of items including weather that delayed new community openings, abandonment of certain opportunities to open new communities as the opportunities did not meet UCP’s underwriting criteria, and lower margins on older communities still in existence from the land purchased as part of the Citizens acquisition. The loss was reported in the Company’s Real Estate operations reducing the balance of the goodwill to zero. The revised forecasts also reduced the contingent consideration liability related to the Citizens acquisition by $2.4 million leaving a balance of $307,000 at September 30, 2016. There were no acquisitions, disposals, or impairments of goodwill during the year ended December 31, 2015.

The Company estimates the fair value of goodwill based on applying the income approach by determining the present value of the estimated future cash flows at a discount rate. When estimating future cash flows, the Company makes various assumptions, including, but not limited to: (i) forecast adjusted pre-tax net income over a ten year period; (ii) weighted average cost of capital; (iii) terminal growth; and (iv) revenue growth and operating profit margin. The risk adjusted discount rate of 14.5% and terminal growth rate of 2.0% were applied to forecast adjusted pre-tax net income.