GOODWILL

Goodwill is an asset representing the future economic benefits arising from other assets in a business combination that are not individually identified and separately recognized and consists of the following:



	Gross Carrying Value		Cumulative Amortization			Cumulative Impairment Losses			Goodwill, Net
	(In thousands)
Goodwill, net by Reportable Segment:
Las Vegas Locals	$	378,192	$	—		$	(165,479	)	$	212,713
Downtown Las Vegas	6,997		(6,134		)	—			863
Midwest and South	50,671		—			(50,671		)	—
Peninsula Gaming	481,353		—			—			481,353
Balance, December 31, 2012	$	917,213	$	(6,134	)	$	(216,150	)	$	694,929

We evaluate goodwill using a weighted average allocation of both the income and market approach models. The income approach is based upon a discounted cash flow method, whereas the market approach uses the guideline public company method. Specifically, the income approach focuses on the expected cash flow of the subject reporting unit, considering the available cash flow for a finite period of years. Available cash flow is defined as the amount of cash that could be distributed as a dividend without impairing the future profitability or operations of the reporting unit. The underlying premise of the income approach is that the value of goodwill can be measured by the present value of the net economic benefit to be received over the life of the reporting unit. The market approach focuses on comparing the reporting unit to selected reasonable similar (or “guideline”) publicly-traded companies. Under this method, valuation multiples are: (i) derived from the operating data of selected guideline companies; (ii) evaluated and adjusted based on the strengths and weaknesses of our reporting unit relative to the selected guideline companies; and (iii) applied to the operating data of our reporting unit to arrive at an indication of value. The application of the market approach results in an estimate of the price reasonable expected to be realized from the sale of the subject reporting unit.

Changes in Goodwill

During the year ended December 31, 2012, we recorded $481.4 million of goodwill due to our acquisition of Peninsula Gaming on November 20, 2012. There were no changes in our goodwill, net, during the years ended December 31, 2011 or 2010.

The following table sets forth the changes in our goodwill, net, during the years ended December 31, 2012, 2011 and 2010.



	Goodwill, Net
	(In thousands)
Balance, January 1, 2010	$	213,576
Additions	—
Impairments	—
Balance, December 31, 2010	213,576
Additions	—
Impairments	—
Balance, December 31, 2011	213,576
Additions	481,353
Impairments	—
Balance, December 31, 2012	$	694,929

Impairment Testing

As discussed in Note 1, Summary of Significant Accounting Policies, during the fourth quarter of 2012, the Company changed the date of its annual goodwill impairment test dates to October 1. Prior to the fourth quarter of 2012, the Company performed annual impairment tests on its goodwill on April 1 and October 1 for different reporting units. The change in the impairment test dates for all reporting units to October 1 did not delay, accelerate or avoid an impairment charge. The April 1 test performed prior to the change did not result in any impairment. Management believes that the new impairment test date is preferable because it is more closely aligned with the Company's annual financial planning and budgeting process. These financial plans are a key component utilized in the annual impairment testing process. The change in the impairment test dates constitutes a change in accounting principle under ASC 250, “Accounting for Changes and Error Corrections,” and had no impact on the Company's consolidated balance sheet, statement of operations or cash flows. The Company determined it was impracticable to objectively determine projected cash flows and related valuation estimates that would have been used as of each October 1 for periods prior to October 1, 2012 without the use of hindsight. As such, the Company has prospectively applied the change in annual goodwill impairment testing date from October 1, 2012.

Prior to this change, we performed an annual impairment test of our goodwill in the second quarter of each year, which resulted in no impairment charge as of such measurement dates in 2012, 2011 or 2010, nor was there an impairment charge as of the October 1, 2012 test date. However, if our estimates of projected cash flows related to these properties are not achieved, or our enterprise values are significantly adversely affected by economic changes, or if any other significant assumptions are changed, we may be subject to an interim impairment test prior to our next scheduled annual impairment test, which could have a material adverse impact on our consolidated financial statements.