7.	Intangible Assets and Goodwill


	Useful Life		As of January 27, 2018
Amortizable Intangible Assets	Useful Life		Gross Carrying Amount		Accumulated Amortization			Total
Technology		5-10	$	10,710		(10,303	)	$	407
Other		3-10		6,524		(6,468	)		56

			$	17,234		(16,771	)	$	463


Unamortizable Intangible Assets
Trade name	$	293,400
Publishing contracts		15,894

	$	309,294

Total amortizable and unamortizable intangible assets as of January 27, 2018	$	309,757


			As of January 28, 2017
Amortizable Intangible Assets	Useful Life		Gross Carrying Amount		Accumulated Amortization			Total
Technology		5-10	$	10,710		(9,895	)	$	815
Distribution contracts		10		8,325		(8,127	)		198
Other		3-10		6,418		(6,356	)		62

			$	25,453		(24,378	)	$	1,075


Unamortizable Intangible Assets
Trade name	$	293,400
Publishing contracts		15,894

	$	309,294

Total amortizable and unamortizable intangible assets as of January 28, 2017	$	310,369

All amortizable intangible assets are being amortized over their useful life on a straight-line basis.


Aggregate Amortization Expense
For the 39 weeks ended January 27, 2018	$	514
For the 39 weeks ended January 28, 2017	$	577

Estimated Amortization Expense
(12 months ending on or about April 30)
2018	$	631
2019	$	346

The carrying amounts of goodwill, which relate to the B&N Retail reporting unit, as of January 27, 2018 and January 28, 2017 are as follows:


	Total Company
Balance as of January 28, 2017	$	211,276
Fiscal 2017 benefit of excess tax amortization		(3,895	)
Impairment charge		(133,612	)

Balance as of January 27, 2018	$	73,769

The costs in excess of net assets of businesses acquired are carried as goodwill in the accompanying consolidated balance sheets. ASC 350-30, Goodwill and Other Intangible Assets, requires that goodwill and other unamortizable intangible assets be tested for impairment at least annually or earlier if there are impairment indicators.

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment (ASU 2017-04). The standard simplifies the subsequent measurement of goodwill by removing the requirement to perform a hypothetical purchase price allocation to compute the implied fair value of goodwill to measure impairment. Instead, goodwill impairment is measured as the difference between the fair value of the reporting unit and the carrying value of the reporting unit. The standard also clarifies the treatment of the income tax effect of tax-deductible goodwill when measuring goodwill impairment loss. This standard is effective for annual or any interim goodwill impairment test in fiscal years beginning after December 15, 2019, with early adoption permitted for impairment tests performed after January 1, 2017. The Company has early adopted ASU 2017-04 on October 29, 2017, the first day of its fiscal 2018 third quarter.

The Company compares its fair value of a reporting unit and the carrying value of the reporting unit to measure goodwill impairment loss as required by ASU 2017-04. Fair value was determined using the combination of a discounted cash flow method (income approach) and the guideline public company method (market comparable approach), weighted equally in determining the fair value of the Company. The market comparable approach estimates fair value using market multiples of various financial measures compared to a set of comparable public companies. In performing the valuations, significant assumptions utilized include unobservable Level 3 inputs including cash flows and long-term growth rates reflective of management’s forecasted outlook, and discount rates inclusive of risk adjustments consistent with current market conditions. Discount rates are based on the development of a weighted average cost of capital using guideline public company data, factoring in current market data and any company specific risk factors.

The Company completed its annual goodwill impairment test as of the first day of the third quarter of fiscal 2018 (October 29, 2017). The fair value of the B&N Retail reporting unit had been in excess of carrying value as of the first day of the third quarter of fiscal 2017 (October 30, 2016) based on the annual goodwill impairment test performed as of that date. In addition, no impairment indicators had arisen after that test to signal that an interim impairment test should be performed prior to the next annual test. Although no impairment resulted from the Company’s next annual goodwill impairment test as of October 29, 2017, the fair value of the B&N Retail reporting unit (for which $207,381 of goodwill was allocated as of such date) only exceeded its carrying value by approximately $26,800 or 5%.

Subsequent to this annual goodwill impairment test as of October 29, 2017, sales trends unexpectedly softened during the holiday selling season. Given these lower than expected sales results, the Company revised its forecasted outlook. Following the announcement on January 4, 2018 of the Company’s holiday sales results and its revised outlook, the market price of the Company’s common stock sharply declined. Due to these new impairment indicators, the Company performed an interim goodwill impairment test as of December 30, 2017. As a result of this interim testing, the Company recognized an impairment of its B&N Retail reporting unit goodwill of $133,612. While the Company has initiated a strategic turnaround plan focused on stabilizing sales, improving productivity and reducing expenses, achievement of its long-term goals requires a significant multi-year transformation. The interim test incorporated revised discounted cash flow projections given the Company’s holiday sales performance and the early stage of its turnaround efforts. The fair value of the B&N Retail reporting unit had declined from the prior test primarily as a result of the revised forecast and an increased discount rate to account for risk in the Company’s plan. The goodwill of the B&N Retail reporting unit is subject to further risk of impairment if B&N Retail comparable store sales continue to decline, the Company’s cost reduction plans do not materialize, store closings accelerate, the assumed long-term discount rate increases, or in general the Company does not achieve its forecasted strategic turnaround plan. For example, a 50 basis point decline in its expected long-term growth rates would result in an approximate $10,100 incremental goodwill impairment charge, or a 100 basis point increase in the Company’s discount rate would result in an approximate $23,500 incremental goodwill impairment charge.

No goodwill exists at the NOOK reporting unit.

In addition to goodwill, the Company tests unamortizable intangible assets by comparing the fair value and the carrying value of such assets. The Company also completed its annual impairment tests for its other unamortizable intangible assets by comparing the estimated fair value to the carrying value of such assets. Based on the results of the Company’s tests, the fair values of its unamortizable intangible assets exceeded their respective carrying values as of the most recent testing date, therefore, no impairments were recognized.

With regard to valuing its trade name, the Company uses the relief from royalty method (income approach). The estimated fair value of the Company’s trade name exceeded its carrying value by approximately $17,100 or 5% as of October 29, 2017. Based on the impairment indicators noted above, the Company performed an interim impairment test of its trade name as of December 30, 2017 and the estimated fair value exceeded its carrying value by approximately $23,500 or 8% as of that date. Significant assumptions used to determine fair value under the relief from royalty method include future trends in sales, a royalty rate and an appropriate discount rate inclusive of risk adjustments consistent with market conditions and company specific risk factors. The fair value of the Company’s trade name had declined from the prior year primarily as a result of declining sales and an increased discount rate to account for risk in the Company’s revised forecast. Although the Company determined that no impairment charge was necessary, the Company’s trade name is at risk of impairment if B&N Retail comparable store sales continue to decline, forecasted sales expectations are not met, store closings accelerate, the assumed long-term discount rate increases, or in general the Company does not achieve its forecasted strategic turnaround plan. For example, an 800 basis point decline in expected sales would result in an approximate $1,900 trade name impairment charge, or a 200 basis point increase in the Company’s discount rate would result in an approximate $29,300 trade name impairment charge.

The fair value of the Company’s publishing contracts was determined using the discounted cash flow method (income approach). Based on this test, the estimated fair value of the Company’s publishing contracts exceeded its carrying value by approximately $4,200 or 26%. The Company’s publishing contracts are subject to risk of impairment if forecasted sales expectations are not met, the assumed long-term discount rate increases, or in general the Company does not achieve its forecasted strategic turnaround. Such publishing contracts were tested for impairment and the Company determined that no impairment charge was necessary.