XML 28 R15.htm IDEA: XBRL DOCUMENT v2.4.0.6

Goodwill and other intangible assets

12 Months Ended

Dec. 31, 2011

Goodwill and other intangible assets [Abstract]

Goodwill and other intangible assets

9. Goodwill and other intangible assets

The changes in carrying amount of goodwill for the years ended December 31, 2010 and 2011 are as follows:

						Wanshui				Shenyang								Shengshi								Wenzhou				Wuxi				HK				Zhejiang
		Kaixiang				zhiyuan				Jingli				Haiya				tongda				Botang				Rigao				Ruizhong				Ad-Icon				Continental				Total
Balance as of January 1, 2010		$	12,316			$	5,619			$	2,313			$	3,858			$	116			$	14,117			$	4,904			$	1,354			$	1,294			$	—			$	45,891
Goodwill acquired during the year			—				—				—				—				—				—				—				—				—				17,805				17,805
Goodwill recorded as a result of contingent consideration resolved under ASC Topic 805-20			2,309				225				3,205				1,755				(21	)			6,442				2,806				2,958				897				—				20,576
Impairment of goodwill			(10,230	)			(2,674	)			(3,832	)			(5,608	)			(97	)			(8,864	)			(5,169	)			(1,286	)			(1,651	)			—				(39,411	)
Translation adjustment			154				114				(14	)			(5	)			2				241				38				14				(3	)			553				1,094
Balance as of December 31, 2010		$	4,549			$	3,284			$	1,672			$	—			$	—			$	11,936			$	2,579			$	3,040			$	537			$	18,358			$	45,955
Goodwill acquired during the year			—				—				—				—				—				—				—				—				—				—				—
Deconsolidation of VIE			—				—				—				—				—				—				(2,710	)			—				—				—				(2,710	)
Impairment of goodwill			(1,460	)			(1,044	)			(1,714	)			—				—				(4,798	)			—				(95	)			—				(18,816	)			(27,927	)
Translation adjustment			195				142				42				—				—				487				131				152				1				458				1,608
Balance as of December 31, 2011		$	3,284			$	2,382			$	—			$	—			$	—			$	7,625			$	—			$	3,097			$	538			$	—			$	16,926

The gross amount and accumulated impairment losses of goodwill as of December 31, 2010 and 2011 are as follows:

						Wanshui				Shenyang								Shengshi								Wenzhou				Wuxi				HK				Zhejiang
		Kaixiang				zhiyuan				Jingli				Haiya				tongda				Botang				Rigao				Ruizhong				Ad-Icon				Continental				Total
Goodwill, gross		$	15,007			$	10,168			$	15,862			$	7,929			$	99			$	30,877			$	7,862			$	4,354			$	2,187			$	18,358			$	112,703
Accumulated impairment losses			(10,458	)			(6,884	)			(14,190	)			(7,929	)			(99	)			(18,941	)			(5,283	)			(1,314	)			(1,650	)			—				(66,748	)
Balance as of December 31, 2010		$	4,549			$	3,284			$	1,672			$	—			$	—			$	11,936			$	2,579			$	3,040			$	537			$	18,358			$	45,955
Goodwill, gross		$	15,774			$	10,688			$	16,672			$	8,334			$	104			$	32,454			$	8,264			$	4,576			$	2,190			$	19,295			$	118,351
Accumulated impairment losses			(12,490	)			(8,306	)			(16,672	)			(8,334	)			(104	)			(24,829	)			(8,264	)			(1,479	)			(1,652	)			(19,295	)			(101,425	)
Balance as of December 31, 2011		$	3,284			$	2,382			$	—			$	—			$	—			$	7,625			$	—			$	3,097			$	538			$	—			$	16,926

Accumulated impairment losses include current year impairment loss charged to Statement of Operations and translation differences of Goodwill at different years end closing rate.

Goodwill impairment

Management performs a goodwill impairment test for each of its reporting units as of December 31 of each year or when circumstances change that would more likely than not that the carrying amount of goodwill may be impaired. As a result of impairment tests, the Group recorded a goodwill impairment loss of $15,749, $39,411 and $27,927 for the years ended December 31, 2009, 2010 and 2011, respectively.

The Group applied the income approach to estimate the fair value of its reporting units for goodwill impairment tests. The key assumptions used in this approach, which requires significant management judgment, include business assumptions, growth rate, terminal value, discount rate, and tax amortization benefit. Under this approach, the free cash flow to the Company was first estimated and then the after tax weighted average cost of capital (“WACC”) was used to discount the cash flow to calculate the estimated value. To select the appropriate discount rate, the Company used both the CAPM model and the build up method and then using the weighted average by capital amount weighting. The Company then selected the average of both methods to estimate the WACC to arrive at the concluded discount rate of 20.0%, 21.5% and 18.0% as of December 31, 2009, 2010 and 2011 respectively.

Our goodwill primarily arises from the initial consideration paid and subsequent settlement of contingent consideration of our business acquisitions. Before the issuance of ASC Topic 805-20, the contingent purchase price consideration for each entity is payable when each individual 12-month period during the earn-out period is completed and the operational results were agreed and confirmed. As such, the purchase price allocation cannot be completed until the contingencies are resolved in accordance with SFAS No. 141. Therefore, the contingent consideration was not determinable beyond a reasonable doubt for the 2008 acquisitions, and no goodwill was recognized due to the contingent nature of the consideration. Based on the Group’s audited operating results through December 31, 2009 and the amended acquisition agreements during December 31, 2010, the Company recorded additional consideration payable which resulted in additional goodwill in 2010.

In April 2009, the FASB issued Staff Position No. FSP FAS 141(R)-1,”Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies” (“ASC Topic 805-20”). This updated guidance amended the accounting treatment for assets and liabilities arising from contingencies in a business combination and requires that pre-acquisition contingencies be recognized at fair value, if fair value can be reasonably determined. If fair value cannot be reasonably determined, measurement should be based on the best estimate in accordance with SFAS No. 5, “Accounting for Contingencies” (“ASC Topic 450”).

The Group performed its annual impairment test at the end of the year, which indicated that the carrying amount exceeded the fair value by a significant margin. The impairment test resulted in an additional goodwill impairment loss in 2010 and 2011, as the valuation analysis indicated that the fair values of the reporting units were less than the carrying value. The Group recognized significant goodwill impairment on the acquired companies right after the Company recorded additional contingent consideration due to:

1. Decline in performance of Zhejiang Continental, which results in goodwill impairment of $18,816 for the year ended December 31, 2011;

2. The implied fair value of the goodwill was lower than the carrying value when the Company considered cash flow stream in the goodwill impairment test;

3. The discount rate used in the valuation model during the impairment test is higher than the discount rate used in the purchase price allocation due to higher risk associates with advertising industry in recent years;

4. For the acquisitions occurred in 2008, the Company accounted for the acquisition under FAS 141 and record goodwill when the contingent consideration is realized. As a result, the Company recorded the 2009 earn-out payment only when the contingency was realized in 2010. As at the year ended December 31, 2010 and 2011, the Company performed the goodwill impairment test based on the actual net income which is significantly lower than the 2008 and 2009 net income. Accordingly, the Company revised the future projection of its subsidiaries due to:

• the acquisitions took place before the financial crisis in 2008. The overall business dropped significantly due to the economic downturn;

• the ex-owners had less incentive to expand the business after the earn-out period;

• the synergy of consolidating and integrating multiple acquired businesses is lower than what we expected.

Intangible assets other than goodwill consist of the following:

		Weighted average amortization  period		As of December 31,
				2010				2011
Gross amount
Customer relationship		0.5-3.4 years		$	3,511			$	3,533
Lease agreements		1-4.4 years			7,831				6,696
Non-compete agreements		3.4 years			480				505
					11,822				10,734
Accumulated amortization
Customer relationship					(2,584	)			(2,915	)
Lease agreements					(4,242	)			(4,789	)
Non-compete agreements					(86	)			(237	)
					(6,912	)			(7,941	)
Accumulated impairment
Customer relationship					(16	)			(618	)
Lease agreements					(940	)			(1,907	)
Non-compete agreements					—				(268	)
					(956	)			(2,793	)
Net intangible assets
Customer relationship					911				—
Lease agreements					2,649				—
Non-compete agreements					394				—
				$	3,954			$	—

For year ended December 31, 2011, the Group recorded an impairment loss on its intangible assets in the amount of $2,723 associated with Zhejiang Continental mainly due to the decline in business performance. There was no impairment loss for the years ended December 31, 2009 and 2010.

Amortization of intangible assets was allocated to the following categories of cost and expenses:

		Years Ended December 31,
		2009				2010				2011
Cost of revenues		$	1,379			$	1,273			$	854
Sales and marketing expenses			636				464				475
Total amortization expenses		$	2,015			$	1,737			$	1,329

There is no future expected amortization of intangible assets as of December 31, 2011, since all of the intangible assets were fully amortized or impaired.

X

- Details

Name:	us-gaap_GoodwillAndIntangibleAssetsDisclosureAbstract
Namespace Prefix:	us-gaap_
Data Type:	xbrli:stringItemType
Balance Type:	na
Period Type:	duration

X

- 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.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 350

-SubTopic 20

-Section 50

-Paragraph 1

-URI http://asc.fasb.org/extlink&oid=6905597&loc=d3e13816-109267



Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 350

-SubTopic 30

-Section 50

-Paragraph 1

-URI http://asc.fasb.org/extlink&oid=6905858&loc=d3e16265-109275



Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 142

-Paragraph 42, 43, 44, 45, 46, 47

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.



Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 350

-SubTopic 30

-Section 50

-Paragraph 3

-URI http://asc.fasb.org/extlink&oid=6905858&loc=d3e16373-109275



Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 350

-SubTopic 30

-Section 50

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=6905858&loc=d3e16323-109275



Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 350

-SubTopic 20

-Section 50

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=6905597&loc=d3e13854-109267

+ Details

Name:	us-gaap_GoodwillAndIntangibleAssetsDisclosureTextBlock
Namespace Prefix:	us-gaap_
Data Type:	nonnum:textBlockItemType
Balance Type:	na
Period Type:	duration