Goodwill and Other Intangibles

3 Months Ended

Mar. 31, 2016

Goodwill And Intangible Assets Disclosure [Abstract]

Note 7 – Goodwill and Other Intangibles

Changes in the carrying amount of goodwill as follows:

				Accumulated			Net
	Gross			Impairment			Carrying
	Amount			Loss			Value
December 31, 2015	$	32,469,240		$	(22,045,382	)	$	10,423,858
Changes in UGH purchase price allocation		(2,822,049	)		—			(2,822,049	)
March 31, 2016	$	29,647,191		$	(22,045,382	)	$	7,601,809

Goodwill and intangible assets with indefinite lives must be tested for impairment at least once a year. Carrying values are compared with fair values, and when the carrying value exceeds the fair value, the carrying value of the impaired asset is reduced to its fair value. The Company tests goodwill for impairment on an annual basis in the fourth quarter or more frequently if management believes indicators of impairment exist. The performance of the test involves a two-step process. The first step of the impairment test involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill. The Company generally determines the fair value of its reporting units using the income approach methodology of valuation that includes the discounted cash flow method as well as other generally accepted valuation methodologies. If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, the Company performs the second step of the goodwill impairment test to determine the amount of impairment loss. The second step of the goodwill impairment test involves comparing the implied fair value of the affected reporting unit’s goodwill with the carrying value of that goodwill.

Changes in the carrying amount of intangible assets during the three months ended March 31, 2016 were as follows:

	Carrying		Accumulated
	Amount		Amortization			Net
December 31, 2015	$	14,524,500	$	(7,502,330	)	$	7,022,170
Change in UGH purchase price allocation		3,930,000		—			3,930,000
Amortization		—		(562,816	)		(562,816	)
March 31, 2016	$	18,454,500	$	(8,065,146	)	$	10,389,354

Intangible assets as of March 31, 2016 and December 31, 2015 include the following:

		March 31, 2016							December 31,
	Useful	Carrying		Accumulated					2015
	Life (Years)	Value		Amortization			Net		Net
Management fee contracts	6 - 8	$	3,498,500	$	(2,713,792	)	$	784,708	$	893,723
Non-compete	5		2,027,000		(1,357,382	)		669,618		771,161
Physician memberships	7		6,468,000		(3,157,000	)		3,311,000		3,542,000
Medicare license	20		3,930,000		(47,733	)		3,882,267		—
Trade name	5		381,000		(208,034	)		172,966		192,379
Service Contracts	10		2,150,000		(581,205	)		1,568,795		1,622,907
		$	18,454,500	$	(8,065,146	)	$	10,389,354	$	7,022,170

Amortization expense for the three months ended March 31, 2016 and 2015 was $562,816 and $514,556, respectively.

Amortization expense for the next five years related to these intangible assets is expected to be as follows:

Twelve months ending March 31,
2017	$	2,248,629
2018		2,011,506
2019		1,356,950
2020		944,931
2021		405,931
Thereafter		3,421,406

- 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 + Details

Foundation Healthcare, Inc. 10-Q