GOODWILL

Many of the former owners and staff of acquired funeral homes and certain cemeteries have provided high quality service to families for generations. The resulting loyalty often represents a substantial portion of the value of a business. The excess of the purchase price over the fair value of net identifiable assets acquired and liabilities assumed, as determined by management in business acquisition transactions accounted for as purchases, is recorded as goodwill.

We performed our 2013 annual impairment test of goodwill using information as of August 31, 2013. Under current guidance, we are permitted to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. We conducted qualitative assessments in 2011 and 2012; however, for our 2013 annual impairment test, we performed the two-step goodwill impairment test. Our intent is to perform the two-step test least once every three years unless certain indicators or events suggest otherwise. Also see Note 1 to the Consolidated Financial Statements for a discussion of the methodology used for the annual goodwill impairment test. Based on our 2013 impairment test, we concluded that there was no impairment of goodwill.

The following table presents changes in goodwill in the accompanying Consolidated Balance Sheets for the years ended December 31, 2012 and 2013 (in thousands):



	December 31, 2012			December 31, 2013
Goodwill at beginning of year	$	193,962		$	218,442
Increase in goodwill related to acquisitions	25,683			3,843
Impairments and changes in previous estimates	(1,118		)	(101		)
Reclassification of assets held for sale	(85		)	—
Decrease in goodwill due to divestitures	—			(1,097		)
Goodwill at the end of the year	218,442			221,087

The impairment of $0.1 million in the year ended December 31, 2013 is related to a business discontinued in the first quarter of 2013 as the carrying value exceeded fair value.