Goodwill And Acquired Intangible Assets

Goodwill and Acquired Intangible Assets

We have two reportable segments: (1) software products and (2) services. As of September 30, 2014 and 2013, goodwill and acquired intangible assets in the aggregate attributable to our software products reportable segment was $1,283.0 million and $979.3 million, respectively, and attributable to our services reportable segment was $66.4 million and $62.9 million, respectively. Goodwill is tested for impairment at least annually, or on an interim basis if an event occurs or circumstances change that would, more likely than not, reduce the fair value of the reporting segment below its carrying value. We completed our annual goodwill impairment review as of June 28, 2014 and concluded that no impairment charge was required as of that date. To conduct these tests of goodwill, the fair value of the reporting unit is compared to its carrying value. If the reporting unit’s carrying value exceeds its fair value, we record an impairment loss equal to the difference between the carrying value of goodwill and its implied fair value. We estimate the fair values of our reporting units using discounted cash flow valuation models. Those models require estimates of future revenues, profits, capital expenditures, working capital, terminal values based on revenue multiples, and discount rates for each reporting unit. We estimate these amounts by evaluating historical trends, current budgets, operating plans and industry data. The estimated fair value of each reporting unit was more than double its carrying value as of June 28, 2014. Through September 30, 2014, there have not been any events or changes in circumstances that indicate that the carrying values of goodwill or acquired intangible assets may not be recoverable.

Goodwill and acquired intangible assets consisted of the following:



	September 30, 2014						September 30, 2013
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
	(in thousands)
Goodwill (not amortized)					$	1,012,527					$	769,095
Intangible assets with finite lives (amortized) (1):
Purchased software	$	278,012	$	162,259	$	115,753	$	233,566	$	148,127	$	85,439
Capitalized software	22,877		22,877		—		22,877		22,877		—
Customer lists and relationships	360,530		147,469		213,061		304,434		120,338		184,096
Trademarks and trade names	18,479		10,964		7,515		13,427		10,097		3,330
Other	4,117		3,573		544		3,784		3,528		256
	$	684,015	$	347,142	$	336,873	$	578,088	$	304,967	$	273,121
Total goodwill and acquired intangible assets					$	1,349,400					$	1,042,216

(1) The weighted average useful lives of purchased software, customer lists and relationships, trademarks and trade names and other intangible assets with a remaining net book value are 9 years, 10 years, 9 years and 3 years, respectively.

The changes in the carrying amounts of goodwill from October 1, 2013 to September 30, 2014 are due to the impact of acquisitions (described in Note E) and to foreign currency translation adjustments related to those asset balances that are recorded in non-U.S. currencies.

Changes in goodwill presented by reportable segment were as follows:



	Software Products Segment			Services Segment			Total
	(in thousands)
Balance, October 1, 2012	$	585,469		$	24,878		$	610,347
Acquisition of Servigistics	127,033			12,800			139,833
Acquisition of NetIDEAS	—			10,196			10,196
Acquisition of Enigma	3,570			581			4,151
Foreign currency translation	4,476			92			4,568
Balance, September 30, 2013	720,548			48,547			769,095
Acquisition of ThingWorx	102,190			—			102,190
Acquisition of Atego	27,256			—			27,256
Acquisition of Axeda	126,034			4,409			130,443
Foreign currency translation	(16,260		)	(197		)	(16,457		)
Balance, September 30, 2014	$	959,768		$	52,759		$	1,012,527

The aggregate amortization expense for intangible assets with finite lives recorded for the years ended September 30, 2014, 2013 and 2012 was reflected in our consolidated statements of operations as follows:



	Year ended September 30,
	2014		2013		2012
	(in thousands)
Amortization of acquired intangible assets	$	32,127	$	26,486	$	20,303
Cost of license revenue	17,746		18,586		15,819
Cost of service revenue	366		—		—
Total amortization expense	$	50,239	$	45,072	$	36,122

The estimated aggregate future amortization expense for intangible assets with finite lives remaining as of September 30, 2014 is $54.7 million for 2015, $51.2 million for 2016, $48.6 million for 2017, $46.3 million for 2018, $36.7 million for 2019, and $99.4 million thereafter.

- 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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