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Goodwill and Intangible Assets

3 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

11. Goodwill and Intangible Assets

The table below summarizes goodwill balances by reporting unit (in thousands):


	September 30,		June 30,		September 30,
Reporting Unit	2020		2020		2019
Chamberlain	$	4,716	$	4,716	$	4,716
AUC		68,321		68,321		68,321
RUSM and RUSVM		237,173		237,173		237,173
Financial Services		376,270		376,004		376,782
Total	$	686,480	$	686,214	$	686,992

The table below summarizes goodwill balances by reportable segment (in thousands):


	September 30,		June 30,		September 30,
Reportable Segment	2020		2020		2019
Medical and Healthcare	$	310,210	$	310,210	$	310,210
Financial Services		376,270		376,004		376,782
Total	$	686,480	$	686,214	$	686,992

The table below summarizes the changes in goodwill balances by reportable segment (in thousands):


	Medical and		Financial
	Healthcare		Services		Total
June 30, 2019	$	310,210	$	377,046	$	687,256
Foreign exchange rate changes		—		(264)		(264)
September 30, 2019		310,210		376,782		686,992
Purchase accounting adjustments		—		(92)		(92)
Foreign exchange rate changes		—		(686)		(686)
June 30, 2020		310,210		376,004		686,214
Foreign exchange rate changes		—		266		266
September 30, 2020	$	310,210	$	376,270	$	686,480

The change in the Financial Services segment goodwill balance from June 30, 2020 is the result of a change in the foreign currency exchange rates on the EduPristine goodwill balance recorded in the Indian Rupee compared to the U.S. dollar.

Intangible assets consisted of the following (in thousands):


	September 30, 2020
	Gross Carrying		Accumulated		Weighted-Average
	Amount		Amortization		Amortization Period
Amortizable intangible assets:
Customer relationships	$	68,900	$	(22,744)	10 Years
Curriculum/software		11,600		(2,578)	6 Years
Course delivery technology		6,700		(1,786)	5 Years
Total	$	87,200	$	(27,108)
Indefinite-lived intangible assets:
Trade names	$	95,695
Chamberlain Title IV eligibility and accreditations		1,200
AUC Title IV eligibility and accreditations		100,000
Ross Title IV eligibility and accreditations		14,100
Intellectual property		13,940
Total	$	224,935


	June 30, 2020
	Gross Carrying		Accumulated
	Amount		Amortization
Amortizable intangible assets:
Customer relationships	$	68,900	$	(21,044)
Curriculum/software		11,600		(2,094)
Course delivery technology		7,200		(1,952)
Total	$	87,700	$	(25,090)
Indefinite-lived intangible assets:
Trade names	$	95,664
Chamberlain Title IV eligibility and accreditations		1,200
AUC Title IV eligibility and accreditations		100,000
Ross Title IV eligibility and accreditations		14,100
Intellectual property		13,940
Total	$	224,904


	September 30, 2019
	Gross Carrying		Accumulated
	Amount		Amortization
Amortizable intangible assets:
Customer relationships	$	68,900	$	(15,865)
Curriculum/software		11,600		(644)
Course delivery technology		7,200		(853)
Total	$	87,700	$	(17,362)
Indefinite-lived intangible assets:
Trade names	$	95,746
Chamberlain Title IV eligibility and accreditations		1,200
AUC Title IV eligibility and accreditations		100,000
Ross Title IV eligibility and accreditations		14,100
Intellectual property		13,940
Total	$	224,986

The table below summarizes the indefinite-lived intangible asset balances by reportable segment (in thousands):


	September 30,		June 30,		September 30,
Reportable Segment	2020		2020		2019
Medical and Healthcare	$	137,500	$	137,500	$	137,500
Financial Services		87,435		87,404		87,486
Total	$	224,935	$	224,904	$	224,986

Amortization expense for amortized intangible assets was $2.5 million and $2.5 million for the three months ended September 30, 2020 and 2019, respectively. Estimated intangible asset amortization expense is as follows (in thousands):


	Financial
Fiscal Year	Services
2021 (remaining)	$	7,555
2022		9,943
2023		9,792
2024		9,509
2025		7,933
Thereafter		15,360
Total	$	60,092

All amortizable intangible assets except ACAMS customer relationships are amortized on a straight-line basis. The amount amortized for ACAMS customer relationships is based on the estimated retention of the customers, giving consideration to the revenue and cash flow associated with these existing customers.

Indefinite-lived intangible assets related to trade names, Title IV eligibility and accreditations, and intellectual property are not amortized, as there are no legal, regulatory, contractual, economic or other factors that limit the useful life of these intangible assets to the reporting entity.

Goodwill and indefinite-lived intangibles are not amortized, but are tested for impairment annually and when an event occurs or circumstances change such that it is more likely than not that an impairment may exist. Our annual testing date is May 31.

Adtalem has four reporting units that contained goodwill as of the first quarter of fiscal year 2021. These reporting units constitute components for which discrete financial information is available and regularly reviewed by segment management and the Board. If the carrying amount of a reporting unit containing the goodwill exceeds the fair value of that reporting unit, an impairment loss is recognized to the extent the fair value of the reporting unit goodwill is less than the carrying amount of the goodwill, up to the amount of goodwill recorded. In analyzing the results of operations and business conditions of all four reporting units, as of September 30, 2020, it was determined that no triggering event had occurred that would indicate the carrying value of a reporting unit had exceeded its fair value.

Adtalem has four reporting units that contained indefinite-lived intangible assets as of the first quarter of fiscal year 2021. For indefinite-lived intangible assets, management first analyzes qualitative factors, including results of operations and business conditions of the four reporting units that contained indefinite-lived intangible assets, significant changes in cash flows at the individual indefinite-lived intangible asset level, if applicable, as well as how much previously calculated fair values exceed carrying values to determine if it is more likely than not that the intangible assets associated with these reporting units have been impaired. In qualitatively assessing the indefinite-lived intangible assets of the four reporting units, it was determined that it was more likely than not that these assets’ fair values exceeded their carrying values as of September 30, 2020.

These interim triggering event conclusions were based on the fact that the annual impairment review of Adtalem’s reporting units and indefinite-lived intangible assets resulted in no impairments as of the end of fiscal year 2020, and that no interim events or deviations from planned operating results occurred as of September 30, 2020 that would cause management to reassess these conclusions. Although the COVID-19 pandemic is expected to have a negative effect on the operating results of all four reporting units that contain goodwill and indefinite-lived intangible assets, at this time none of

the effects are considered significant enough to create a triggering event. The effects are currently projected to be short-term and would not significantly decrease long-term cash flow projections; however, should economic conditions continue to deteriorate, the revenue and operating results could also deteriorate to the point where a triggering event would exist and require reassessment of the fair values of goodwill and intangible assets and potential impairments.

Determining the fair value of a reporting unit or an intangible asset involves the use of significant estimates and assumptions. Management bases its fair value estimates on assumptions it believes to be reasonable at the time, but such assumptions are subject to inherent uncertainty. Actual results may differ from those estimates, which could lead to future impairments of goodwill or intangible assets.