GOODWILL

Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. Factors considered important, which could trigger an impairment review, include the following:


•	significant underperformance relative to expected historical or projected future operating results;


•	significant changes in the manner of use of the assets or the strategy for Acacia's overall business;


•	significant negative industry or economic trends;


•	significant adverse changes in legal factors or in the business climate, including adverse regulatory actions or assessments; and


•	significant decline in the Company's stock price for a sustained period.

The Company considers its market capitalization and other valuation techniques as applicable, and the carrying value of its assets and liabilities, including goodwill, when performing goodwill impairment tests. When conducting annual and interim goodwill impairment assessments, the Company initially performs a qualitative evaluation (considering factors described above as applicable) of whether it is more likely than not that goodwill is impaired. If it is determined by a qualitative evaluation that it is more likely than not that goodwill is impaired, the Company then applies a two-step impairment test. The two-step impairment test first compares the fair value of Acacia's reporting unit to its carrying or book value. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired and the Company is not required to perform further testing. If the carrying value of the reporting unit exceeds its fair value, then the Company is required to determine the implied fair value of the reporting unit’s goodwill and if the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then an impairment loss equal to the difference is recorded in the consolidated statement of operations.

As of June 30, 2015, the Company assessed the impact of the recent downward volatility in the Company's stock price and concluded that the decline constituted a triggering event requiring an interim goodwill impairment test pursuant to ASC Topic 350, "Intangibles-Goodwill and Other." The Company conducted the first step of the goodwill impairment test described above for its single reporting unit as of June 30, 2015. The fair value of the reporting unit exceeded its carrying value as of June 30, 2015, and therefore goodwill was determined to not be impaired as of June 30, 2015.

Fair value was estimated using the “Income Approach,” as described by ASC 820, “Fair Value Measurements and Disclosures,” focusing on the estimated future income-producing capability of the Company's assets, principally its patent portfolios, to determine the present value of the estimated future net economic benefit (cash receipts less cash outlays). The approach included estimates of after-tax cash flows attributable to the Company's aggregate assets and converting these after-tax cash flows to present value through “discounting.” The discounting process contemplated an estimated rate of return that accounts for both the time value of money and investment risk factors. The cash inflows considered were comprised of an estimate of revenues from future licensing. Estimated cash outflows were based on estimated contractual obligations, such as contingent legal fee and inventor royalty obligations, applied to estimated revenues, in addition to other estimates of out-of-pocket expenses associated with licensing and enforcement and ongoing operations. Net cash flows also considered utilization of the Company's applicable tax assets, including net operating loss carryforwards, subject to applicable limitations on use.