Goodwill, Regulatory Authorizations and Other Intangible Assets

Note 10.Goodwill, Regulatory Authorizations and Other Intangible Assets

Goodwill

The excess of the cost of an acquired business over the fair values of net tangible and identifiable intangible assets at the time of the acquisition is recorded as goodwill. Goodwill is assigned to our reporting units of our operating segments and is subject to impairment testing annually, or more frequently when events or changes in circumstances indicate the fair value of a reporting unit is more likely than not less than its carrying amount.

Changes in the carrying amount of our goodwill by reportable segment for the years ended December 31, 2015 and 2014 are as follows:

	Hughes		ETC		Consolidated Total
	(In thousands)
Balance as of December 31, 2013	$	504,173	$	—	$	504,173
Sling TV Holding exchange	—		6,457		6,457

Balance as of December 31, 2014	504,173		6,457		510,630

Balance as of December 31, 2015	$	504,173	$	6,457	$	510,630

As of December 31, 2015, approximately $504.2 million of our goodwill was assigned to reporting units of our Hughes segment. We test this goodwill for impairment annually in the second quarter. Based on our qualitative assessment of impairment of such goodwill in the second quarter of 2015, we determined that it was not more likely than not that the fair values of the Hughes segment reporting units were less than the corresponding carrying amounts.

In August 2014, we and Sling TV Holding entered into the Exchange Agreement pursuant to which, among other things, Sling TV Holding distributed certain assets to us at their carrying amounts, including our Move Networks business with associated goodwill of $6.5 million. See Note 19 for information about the Exchange Agreement.

Regulatory Authorizations

Regulatory authorizations included amounts with finite and indefinite useful lives, as follows:

	As of						Currency			As of
	December 31,						Translation			December 31,
	2014			Additions			Adjustment			2015
	(In thousands)
Finite useful lives:
Cost	$	103,499		$	—		$	(21,492	)	$	82,007
Accumulated amortization	(6,778		)	(4,741		)	1,667			(9,852		)

Net	96,721			(4,741		)	(19,825		)	72,155
Indefinite lives	471,657			—			—			471,657

Total regulatory authorizations, net	$	568,378		$	(4,741	)	$	(19,825	)	$	543,812

In December 2013, we acquired 100.0% of Solaris Mobile which is based in Dublin, Ireland and licensed by the European Union and its member states (“EU”) to provide mobile satellite services and a complementary ground component services covering the entire EU using S-band spectrum. Solaris Mobile changed its name to EchoStar Mobile Limited (“EchoStar Mobile”) in the first quarter of 2015. On the acquisition date, EchoStar Mobile lacked certain inputs and processes that would be necessary to be considered a business. Accordingly, we accounted for the transaction as an acquisition of net assets. The primary acquired asset was an EU regulatory authorization for S-band frequencies, which had a cost of $51.8 million, consisting of $43.4 million in cash payments and $10.3 million in assumed liabilities. The cost of the regulatory authorization is being amortized using the straight-line method over the remaining term of the authorization ending in May 2027.

In June 2013 we entered into an agreement with DISH Network pursuant to which we conveyed to DISH Network certain of our rights under a Canadian regulatory authorization to develop certain spectrum rights at the 103 degree west longitude orbital location, which we acquired for $20.0 million in cash in 2012. In the third quarter of 2013, we received $23.1 million from DISH Network in exchange for these rights. In accordance with accounting principles that apply to transfers of assets between companies under common control, we did not recognize any gain on this transaction. Rather, we increased our additional paid-in capital to reflect the excess of the cash payment over the carrying amount of the derecognized intangible asset, net of related income taxes.

Amortization expense for the regulatory authorizations with finite lives was $4.7 million, $6.1 million and $1.5 million for the years ended December 31, 2015, 2014 and 2013.

Other Intangible Assets

Our other intangible assets, which are subject to amortization, consisted of the following:

	Weighted	As of December 31,
	Average	2015							2014
	Useful life			Accumulated			Carrying				Accumulated			Carrying
	(in Years)	Cost		Amortization			Amount		Cost		Amortization			Amount
		(In thousands)
Customer relationships	8	$	293,932	$	(213,543	)	$	80,389	$	293,932	$	(185,393	)	$	108,539
Contract-based	10	255,366		(251,493		)	3,873		255,366		(233,009		)	22,357
Technology-based	7	137,337		(111,840		)	25,497		140,837		(100,940		)	39,897
Trademark portfolio	20	29,700		(6,806		)	22,894		29,700		(5,321		)	24,379
Favorable leases	4	4,707		(4,707		)	—		4,707		(4,217		)	490

Total other intangible assets		$	721,042	$	(588,389	)	$	132,653	$	724,542	$	(528,880	)	$	195,662

Customer relationships are amortized predominantly in relation to the expected contribution of cash flow to the business over the life of the intangible asset. Other intangible assets are amortized on a straight-line basis over the periods the assets are expected to contribute to our cash flows. For the years ended December 31, 2015, 2014 and 2013, intangible asset amortization expense was $75.9 million, $92.1 million and $88.4 million, respectively, including amortization of regulatory authorizations with finite lives and externally marketed capitalized software.

Future Amortization

As of December 31, 2015, our estimated future amortization of intangible assets, including regulatory authorizations with finite lives, was as follows:

	Amount
	(In thousands)
For the Years Ending December 31,
2016	$	48,913
2017	30,040
2018	22,325
2019	21,111
2020	15,774
Thereafter	69,996

Total	$	208,159

- 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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