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Fair value measurements | 3 Months Ended
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Mar. 31, 2021
Fair Value Disclosures [Abstract] |
Fair value measurements | Our policies on impairment of goodwill and indefinite-lived intangible assets and impairment of long-lived assets and amortizable intangibles explain our methodology for assessing impairment of these assets and can be found under the caption "Note 1: Significant Accounting Policies" in the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K. 2020 asset impairment charges – During the quarter ended March 31, 2020, we concluded that a triggering event had occurred for 2 of our reporting units as a result of the COVID-19 pandemic. As such, we completed goodwill impairment analyses for these reporting units as of March 31, 2020. Our analyses indicated that the goodwill of our Promotional Solutions reporting unit was partially impaired and the goodwill of our Cloud Solutions Web Hosting reporting unit was fully impaired. As such, we recorded goodwill impairment charges of $63,356 and $4,317, respectively. The impairment charges were measured as the amount by which the reporting units' carrying values exceeded their estimated fair values, limited to the carrying amount of goodwill. After the impairment charges, $62,785 of goodwill remained in the Promotional Solutions reporting unit as of the measurement date. Also as a result of the impacts of the COVID-19 pandemic, we assessed for impairment certain long-lived assets of our Cloud Solutions Web Hosting reporting unit as of March 31, 2020. As a result of these assessments, we recorded asset impairment charges of $17,678, primarily related to customer list, software and trade name intangible assets. With the exception of certain internal-use software assets, we determined that the assets were fully impaired. We utilized the discounted value of estimated future cash flows to estimate the fair value of the asset group. In our analysis, we assumed a revenue decline of 31% and a gross margin decline of 5.2 points in 2020, as well as a discount rate of 9%. During the first quarter of 2020, we assessed for impairment the carrying value of an asset group related to a small business distributor that we previously purchased. Our assessment was the result of customer attrition during the quarter that impacted our projections of future cash flows. Based on our estimate of discounted future cash flows, we determined that the asset group was partially impaired as of February 29, 2020, and we recorded an asset impairment charge of $2,752, reducing the carrying value of the related customer list intangible asset. In calculating the estimated fair value of the asset group, we assumed no revenue growth, a 1.9 point improvement in gross margin and a discount rate of 11%. Also during the first quarter of 2020, we recorded asset impairment charges of $2,227 related to internal-use software and a small business distributor held for sale. Customer attrition in the business utilizing the software caused us to evaluate the asset for impairment, and this analysis indicated that the software was fully impaired. During the first quarter of 2020, we agreed to sales terms for the small business distributor. Based on the negotiated sales price, we recorded an asset impairment charge to write-down the carrying value of the asset group to its fair value less costs to sell. Information regarding the asset impairment analyses completed during the quarter ended March 31, 2020 was as follows:
|  |  |  | Fair value measurements using |  |
|  | Fair value as of measurement date |  | Quoted prices in active markets for identical assets |  | Significant other observable inputs |  | Significant unobservable inputs |  | Impairment charge
(in thousands) |  |  | (Level 1) |  | (Level 2) |  | (Level 3) |
Intangible assets (Cloud Solutions Web Hosting reporting unit)(1) |  | $ | 2,172 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,172 |  |  | $ | 17,678 |
Small business distributor |  | 7,622 |  |  | — |  |  | — |  |  | 7,622 |  |  | 2,752 |
Other assets |  | 1,412 |  |  | — |  |  | — |  |  | 1,412 |  |  | 2,227 |
Goodwill |  |  |  |  |  |  |  |  |  | 67,673 |
Total |  |  |  |  |  |  |  |  |  | $ | 90,330 |
(1) The impairment charge consisted of $8,397 related to customer lists, $6,932 related to internal-use software and $2,349 related to other intangible assets. Recurring fair value measurements – Funds held for customers included available-for-sale debt securities (Note 3). These securities included a money market fund that is traded in an active market, a mutual fund investment that invests in Canadian and provincial government securities, and an investment in a Canadian guaranteed investment certificate (GIC) with a maturity of 2 years. The cost of the money market fund approximates its fair value because of the short-term nature of the investment. The cost of the GIC approximates its fair value, based on estimates using current market rates offered for deposits with similar remaining maturities. The mutual fund investment is not traded in an active market and its fair value is determined by obtaining quoted prices in active markets for the underlying securities held by the fund. Unrealized gains and losses, net of tax, are included in accumulated other comprehensive loss on the consolidated balance sheets. The cost of securities sold is determined using the average cost method. Realized gains and losses are included in revenue on the consolidated statements of comprehensive income (loss) and were not significant during the quarters ended March 31, 2021 and 2020. Information regarding the fair values of our financial instruments was as follows:
|  |  |  |  |  | Fair value measurements using
|  |  |  | March 31, 2021 |  | Quoted prices in active markets for identical assets (Level 1) |  | Significant other observable inputs (Level 2) |  | Significant unobservable inputs (Level 3)
(in thousands) |  | Balance sheet location |  | Carrying value |  | Fair value |  |  |
Measured at fair value through comprehensive income (loss): |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | Funds held for customers |  | $ | 12,000 |  |  | $ | 12,000 |  |  | $ | 12,000 |  |  | $ | — |  |  | $ | — |
Available-for-sale debt securities |  | Funds held for customers |  | 13,391 |  |  | 13,391 |  |  | — |  |  | 13,391 |  |  | — |
Derivative liability (Note 6) |  | Other non-current liabilities |  | (6,231) |  |  | (6,231) |  |  | — |  |  | (6,231) |  |  | — |
Amortized cost: |  |  |  |  |  |  |  |  |  |  |  |
Cash |  | Cash and cash equivalents |  | 125,440 |  |  | 125,440 |  |  | 125,440 |  |  | — |  |  | — |
Cash |  | Funds held for customers |  | 97,075 |  |  | 97,075 |  |  | 97,075 |  |  | — |  |  | — |
Loans and notes receivable from distributors |  | Other current and non-current assets |  | 28,886 |  |  | 28,843 |  |  | — |  |  | — |  |  | 28,843 |
Long-term debt |  | Long-term debt |  | 840,000 |  |  | 840,000 |  |  | — |  |  | 840,000 |  |  | — |
|  |  |  |  |  | Fair value measurements using
|  |  |  | December 31, 2020 |  | Quoted prices in active markets for identical assets (Level 1) |  | Significant other observable inputs (Level 2) |  | Significant unobservable inputs (Level 3)
(in thousands) |  | Balance sheet location |  | Carrying value |  | Fair value |  |  |
Measured at fair value through comprehensive income (loss): |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | Funds held for customers |  | $ | 15,000 |  |  | $ | 15,000 |  |  | $ | 15,000 |  |  | $ | — |  |  | $ | — |
Available-for-sale debt securities |  | Funds held for customers |  | 13,462 |  |  | 13,462 |  |  | — |  |  | 13,462 |  |  | — |
Derivative liability (Note 6) |  | Other non-current liabilities |  | (7,210) |  |  | (7,210) |  |  | — |  |  | (7,210) |  |  | — |
Amortized cost: |  |  |  |  |  |  |  |  |  |  |  |
Cash |  | Cash and cash equivalents |  | 123,122 |  |  | 123,122 |  |  | 123,122 |  |  | — |  |  | — |
Cash |  | Funds held for customers |  | 91,287 |  |  | 91,287 |  |  | 91,287 |  |  | — |  |  | — |
Loans and notes receivable from distributors |  | Other current and non-current assets |  | 37,076 |  |  | 36,950 |  |  | — |  |  | — |  |  | 36,950 |
Long-term debt |  | Long-term debt |  | 840,000 |  |  | 840,000 |  |  | — |  |  | 840,000 |  |  | — |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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