Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

The following table contains a disclosure of changes in the carrying amount of goodwill in total and for each reporting unit for the two years ended December 31, 2014 and 2013 (in thousands):



	Technology		Finance and Accounting		Health Information Management			Government Solutions			Total
Balance as of December 31, 2012	$	17,034	$	8,006	$	4,887		$	33,483		$	63,410
Impairment of goodwill	—		—		—			(14,510		)	(14,510		)
Balance as of December 31, 2013	$	17,034	$	8,006	$	4,887		$	18,973		$	48,900
Additions (a)	—		—		—			1,955			1,955
Disposition of HIM (b)	—		—		(4,887		)	—			(4,887		)
Balance as of December 31, 2014	$	17,034	$	8,006	$	—		$	20,928		$	45,968


(a)	The increase is due to the acquisition of a business within our GS reporting segment.


(b)	The decrease is due to the disposition of our HIM reporting segment. See Note 2 – “Discontinued Operations” for additional discussion.

Kforce performed its annual impairment assessment of the carrying value of goodwill as of December 31, 2014 and 2013. During the impairment test performed as of December 31, 2014, Kforce performed a step 1 analysis for each reporting unit and compared the carrying value of Tech, FA and GS to the respective estimated fair values. Kforce concluded there were no indications of impairment for its reporting units during the December 31, 2014 annual impairment tests. As of December 31, 2013 and 2012, for our Tech and FA reporting units, we assessed qualitative factors to determine whether the existence of events or circumstances indicated that it was more likely than not that the fair value of the reporting units was less than its carrying amount. We concluded that it was more likely than not that the fair value of the reporting units were more than its carrying amount and therefore we were not required to perform any additional analysis. In 2013 and 2012, for our GS reporting unit, we performed the two-step analysis and compared the carrying value to its estimated fair value noting that the carrying value exceeded the fair value of the reporting unit which resulted in an impairment to goodwill in 2013 and 2012.

As part of our customary quarterly procedures, we considered the qualitative and quantitative factors associated with each of our reporting units and determined that there was no indication that the carrying values of any of our reporting units were likely impaired throughout 2014.

As of December 31, 2014, for our Tech, FA and GS reporting units, we compared the respective carrying values to their estimated fair value based on a weighting of both the income approach and the market approaches. Discounted cash flows, which serve as the primary basis for the income approach, were based on discrete financial forecasts which were developed by management for planning purposes and were consistent with those distributed within Kforce. Cash flows beyond the discrete forecast period of five years were estimated using a terminal value calculation, which incorporated historical and forecasted financial trends and also considered long-term earnings growth rates for publicly-traded peer companies, as well as the risk-free rate of return. For the GS reporting unit, the discrete financial forecast includes certain adjustments of costs that Kforce believes a market participant buyer, such as a large government contractor, would incur to operate the GS reporting unit. The market approaches consist of: (1) the guideline company method and (2) the guideline transaction method. The guideline company method applies pricing multiples derived from publicly-traded guideline companies that are comparable to the respective reporting unit to determine its value. The guideline transaction method applies pricing multiples derived from recently completed acquisitions that we believe are reasonably comparable to the reporting unit to determine fair value.

Upon completion of the first step of the goodwill impairment analysis as of December 31, 2014 for our Tech, FA and GS reporting units, it was determined that the fair value exceeded its carrying value. As a result, no impairment charges were recognized for the Tech, FA and GS reporting units during the year ended December 31, 2014.

During the fourth quarter of 2013, Kforce management made a strategic business decision with regard to the GS segment to focus its service offerings and efforts on prime integrated business solution services. Upon completion of the first step of the goodwill impairment analysis as of December 31, 2013 for our GS reporting unit, it was determined that there was an indication of impairment. Because indicators of impairment existed, we commenced the second step of the goodwill impairment analysis. The goodwill impairment loss for the reporting unit was measured by the amount the carrying value of goodwill exceeded the implied fair value of the goodwill. Based on this assessment, we recorded an impairment charge of $14.5 million which is presented separately in the Consolidated Statements of Operations and Comprehensive Income (Loss). A tax benefit in the amount of $5.2 million was recorded related to the goodwill impairment charge.

During the three months ended June 30, 2012, due to certain adverse effects of events and indications during that time period, Kforce believed that a triggering event occurred within our GS reporting unit during the quarter. As a result, Kforce performed an interim goodwill impairment analysis for its GS reporting unit as of June 30, 2012, which resulted in an indication of impairment and Kforce recording an estimated impairment charge. Due to the complexity of the second step of the impairment analysis, Kforce completed the analysis during the fourth quarter of 2012. Based on this assessment, we recorded an impairment charge of $69.2 million which included a related tax benefit of $24.7 million during the year ended December 31, 2012. This impairment charge included an incremental adjustment of $3.9 million with a related tax benefit of $1.4 million resulting from the completion of the second step analysis during the fourth quarter of 2012.

Total goodwill impairment for the years ending December 31, 2014, 2013 and 2012 was nil, $14.5 million and $69.2 million, respectively. The following table contains a disclosure of the gross amount and accumulated impairment losses of goodwill for Tech, FA and GS reporting units for the three years ended December 31, 2014 (in thousands):



	Goodwill Carrying Value by Reporting Unit as of:
	December 31, 2014			December 31, 2013			December 31, 2012
Technology
Gross amount	$	156,391		$	156,391		$	156,391
Accumulated impairment losses	(139,357		)	(139,357		)	(139,357		)
Carrying value	$	17,034		$	17,034		$	17,034
Finance and Accounting
Gross amount	$	19,766		$	19,766		$	19,766
Accumulated impairment losses	(11,760		)	(11,760		)	(11,760		)
Carrying value	$	8,006		$	8,006		$	8,006
Government Solutions
Gross amount	$	104,596		$	102,641		$	102,641
Accumulated impairment losses	(83,668		)	(83,668		)	(69,158		)
Carrying value	$	20,928		$	18,973		$	33,483

Other Intangible Assets

The gross and net carrying values of intangible assets as of December 31, 2014 and 2013, by major intangible asset class, are as follows (in thousands):



	December 31, 2014			December 31, 2013
Definite-lived intangible assets
Customer relationships, customer contracts, technology and other
Gross amount	$	28,603		$	27,940
Accumulated amortization	(25,832		)	(25,187		)
Carrying value	$	2,771		$	2,753
Indefinite-lived intangible assets
Trade name and trademark
Gross amount	$	2,240		$	2,240
Accumulated impairment losses	—			—
Carrying value	$	2,240		$	2,240

Amortization expense on intangible assets for each of the three years ended December 31, 2014, 2013, and 2012 was $0.7 million, $0.7 million and $0.9 million, respectively. Amortization expense for 2015, 2016, 2017, 2018, 2019 and thereafter is expected to be approximately $0.8 million, $0.6 million, $0.3 million, $0.3 million, $0.3 million and $0.4 million, respectively.

There was no impairment expense related to indefinite-lived intangible assets during the years ended December 31, 2014, 2013 or 2012.

- 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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