Goodwill and Intangible Assets

3 Months Ended

Nov. 30, 2011

Notes to Condensed Consolidated Financial Statements [Abstract]

Goodwill represents the excess of the purchase price over the fair value assigned to the assets acquired and liabilities assumed. Changes in the carrying amount of goodwill from August 31, 2011 to November 30, 2011 are as follows:



			Apollo Global
	University of								Other		Total
($ in thousands)	Phoenix		BPP			Other			Schools		Goodwill
Goodwill as of August 31, 2011	$	37,018	$	50,694		$	30,275		$	15,310	$	133,297
Goodwill acquired⁽¹⁾	34,794		—			—			—		34,794
Impairment⁽²⁾	—		—			(11,912		)	—		(11,912		)
Currency translation adjustment	—		(3,529		)	(3,011		)	—		(6,540		)
Goodwill as of November 30, 2011	$	71,812	$	47,165		$	15,352		$	15,310	$	149,639

⁽¹⁾ Goodwill acquired during the first quarter of fiscal year 2012 resulted from our acquisition of Carnegie Learning. Refer to Note 5, Acquisitions.

⁽²⁾ We recorded an impairment charge of $11.9 million of UNIACC’s goodwill during the first quarter of fiscal year 2012. See below for further discussion.

Intangible assets, net consists of the following as of November 30, 2011 and August 31, 2011:



	November 30, 2011										August 31, 2011
($ in thousands)	Gross Carrying Amount		Accumulated Amortization			Effect of Foreign Currency Translation Loss			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Effect of Foreign Currency Translation Loss			Net Carrying Amount
Finite-lived intangible assets
Software and technology⁽¹⁾	$	42,389	$	(1,837	)	$	—		$	40,552	$	3,600	$	(3,450	)	$	—		$	150
Student and customer relationships⁽¹⁾	14,109		(3,298		)	(1,526		)	9,285		9,477		(6,538		)	(1,284		)	1,655
Copyrights	20,891		(12,995		)	(868		)	7,028		20,891		(11,521		)	(422		)	8,948
Other⁽²⁾	12,878		(8,700		)	(1,196		)	2,982		15,102		(9,049		)	(1,166		)	4,887
Total finite-lived intangible assets	90,267		(26,830		)	(3,590		)	59,847		49,070		(30,558		)	(2,872		)	15,640
Indefinite-lived intangible assets
Trademarks^{(1), (2)}	108,961		—			(5,926		)	103,035		98,849		—			(737		)	98,112
Accreditations and designations⁽²⁾	7,260		—			(574		)	6,686		7,456		—			(91		)	7,365
Total indefinite-lived intangible assets	116,221		—			(6,500		)	109,721		106,305		—			(828		)	105,477
Total intangible assets, net	$	206,488	$	(26,830	)	$	(10,090	)	$	169,568	$	155,375	$	(30,558	)	$	(3,700	)	$	121,117

⁽¹⁾ We acquired certain intangible assets during the first quarter of fiscal year 2012 as a result of our acquisition of Carnegie Learning. Refer to Note 5, Acquisitions.

⁽²⁾ We recorded an impairment charge of $4.9 million of UNIACC’s intangible assets during the first quarter of fiscal year 2012. See below for further discussion.

On November 17, 2011, UNIACC was advised by the National Accreditation Commission of Chile that its institutional accreditation would not be renewed and therefore had lapsed. UNIACC expects to appeal the decision. The loss of accreditation from the National Accreditation Commission does not impact UNIACC’s ability to operate or confer degrees and does not directly affect UNIACC’s programmatic accreditations. However, this institutional accreditation is necessary for new UNIACC students to participate in government loan programs and for existing students to begin to participate in such programs for the first time. Currently enrolled students who participate in these programs, who constitute about 30% of degree-seeking students, will continue to be eligible to participate. Accordingly, if this action is not reversed, we expect that UNIACC will experience a reduction in new enrollment in its degree programs due to the unavailability of the government loan programs. Based on these factors and related uncertainty, we revised our cash flow estimates and performed an interim goodwill impairment analysis for UNIACC in the first quarter of fiscal year 2012.

To determine the fair value of the UNIACC reporting unit in our interim step one analysis, we used a discounted cash flow valuation method and assumptions that we believe would be a reasonable market participant’s view of the impact of the loss of accreditation status and the increased uncertainty impacting UNIACC. We used significant unobservable inputs (Level 3) in our discounted cash flow valuation. For further discussion of the valuation methods we employ, refer to our 2011 Annual Report on Form 10-K.

Our interim step one goodwill impairment analysis resulted in a lower estimated fair value for the UNIACC reporting unit as compared to its carrying value. Based on the estimated fair value of the UNIACC reporting unit and a hypothetical purchase price allocation, we determined the UNIACC reporting unit would have no implied goodwill. Additionally, our interim impairment tests for the trademark and accreditation intangible asset utilized the same significant unobservable inputs (Level 3) and assumptions used in UNIACC’s interim goodwill analysis resulted in minimal or no fair value. Accordingly, UNIACC’s entire goodwill balance and the trademark and accreditation indefinite-lived intangible assets totaling $11.9 million and $3.9 million, respectively, were determined to be impaired.

We also evaluated UNIACC’s remaining long-lived assets, including property and equipment and finite-lived intangible assets, for recoverability and determined certain finite-lived intangible assets were impaired totaling $1.0 million. In the first quarter of fiscal year 2012, UNIACC’s goodwill and other intangibles impairment charges in the aggregate were $16.8 million, with no income tax benefit as UNIACC’s goodwill and other intangibles are not deductible for tax purposes.

- 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.

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