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GOODWILL AND INTANGIBLE ASSETS, NET

12 Months Ended

Mar. 31, 2011

10. GOODWILL AND INTANGIBLE ASSETS, NET

We perform an annual two-step test for impairment of goodwill as of the beginning of August or whenever events or changes in circumstances indicate the fair value of a reporting unit is below its carrying amount. The first step of the test measures impairment by applying fair value-based tests at the reporting unit level. The second step (if necessary) measures the amount of impairment by applying fair value-based tests to individual assets and liabilities within each reporting unit. Prior to the sale of our Jack of all Games third-party distribution business, which closed in February 2010 (see Note 2), we managed our business primarily based on our publishing and distribution businesses. Accordingly, after the sale of the assets of our distribution business, the Company operates as a single reporting unit.

We use a combination of the market approach, and the income approach, which uses discounted cash flows. Each step requires us to make judgments and involves the use of significant estimates and assumptions. These estimates and assumptions include long-term growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates based on our weighted average cost of capital, future economic and market conditions and the determination of appropriate market comparables. Our estimates for market growth are based on historical data, various internal estimates and observable external sources when available, and are based on assumptions that are consistent with the plans and estimates we use to manage the underlying business. Due to a decline in the retail environment during the fiscal year ended October 31, 2009 and its impact on our outlook for our distribution reporting unit, we determined that the goodwill and intangible assets attributed to our distribution reporting unit were impaired. As a result, we recorded an impairment charge of $14,754 which is reported in loss from discontinued operations on the Consolidated Statements of Operations (see Note 2). For the fiscal year ended March 31, 2011, five months ended March 31, 2010 and fiscal year ended October 31, 2008, we did not recognize an impairment loss on goodwill.

The change in our goodwill balance is as follows:

	Total

Balance at October 31, 2008	$	216,657
Additions and adjustments		1,898
Currency translation adjustment		2,326

Balance at October 31, 2009		220,881

Sale of Italian subsidiary		(1,937	)
Currency translation adjustment		(2,655	)

Balance at March 31, 2010		216,289

Additions and adjustments		5,272
Currency translation adjustment		3,609

Balance at March 31, 2011	$	225,170

The following table sets forth the components of the intangible assets subject to amortization:

			March 31, 2011							March 31, 2010							October 31, 2009

	Estimated Useful Lives (Years)		March 31, 2011							March 31, 2010							October 31, 2009
	Estimated Useful Lives (Years)		Gross Carrying Amount		Accumulated Amortization			Net Book Value		Gross Carrying Amount		Accumulated Amortization			Net Book Value		Gross Carrying Amount		Accumulated Amortization			Net Book Value
Trademarks		7-10	$	13,796	$	(12,910	)	$	886	$	13,778	$	(12,306	)	$	1,472	$	13,796	$	(12,101	)	$	1,695
Intellectual property		2-6		26,962		(10,744	)		16,218		26,954		(6,813	)		20,141		26,959		(6,775	)		20,184
Non-compete		5-10		5,246		(4,957	)		289		5,241		(4,565	)		676		5,248		(4,344	)		904
Technology		3		4,394		(3,954	)		440		4,342		(3,902	)		440		4,458		(4,017	)		441

			$	50,398	$	(32,565	)	$	17,833	$	50,315	$	(27,586	)	$	22,729	$	50,461	$	(27,237	)	$	23,224

The change in the gross carrying amount of intangibles is as follows:

	Fiscal Year Ended March 31, 2011		Five Months Ended March 31, 2010			Fiscal Year Ended October 31, 2009

Beginning balance	$	50,315	$	50,461		$	51,227
Write-off of fully amortized assets		—		—			(938	)
Other		83		(146	)		172

Ending balance	$	50,398	$	50,315		$	50,461

Amortization of intangible assets is included in our Consolidated Statements of Operations as follows:

	Fiscal Year Ended March 31,				Ended March 31,		Fiscal Year Ended October 31,

	2011		2010		2010		2009		2008
			(Unaudited)
Cost of goods sold	$	3,927	$	109	$	40	$	478	$	2,350
Depreciation and amortization		983		1,234		442		1,861		3,898

Total amortization of intangible assets	$	4,910	$	1,343	$	482	$	2,339	$	6,248

Estimated future amortization of intangible assets that will be recorded in cost of goods sold and operating expenses for the years ending March 31 are as follows:


2012	$	8,140
2013		4,582
2014		431
2015		2,375
2016		2,305

Total	$	17,833

- Definition

Discloses 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 or 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. This element may be used as a single block of text to include the entire intangible asset disclosure including data and tables.

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