Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

The Company’s goodwill and intangible assets are associated with the purchase of Virtek Communication (now KVH Industries Norway AS) in September 2010, Headland Media Limited (now known as the KVH Media Group) in May 2013, and Videotel in July 2014. Intangibles arising from the acquisition made prior to 2013 were amortized on a straight-line basis over an estimated useful life of 7 years. Intangibles arising from the acquisition of KVH Media Group are being amortized on a straight-line basis over the estimated useful life of: (i) 10 years for acquired subscriber relationships, (ii) 15 years for distribution rights, (iii) 3 years for internally developed software and (iv) 2 years for proprietary content. Intangibles arising from the acquisition of Videotel are being amortized on a straight-line basis over the estimated useful life of: (i) 8 years for acquired subscriber relationships, (ii) 5 years for favorable leases, (iii) 4 years for internally developed software and (iv) 5 years for proprietary content. The intangibles arising from the KVH Media Group and Videotel acquisitions were recorded in pounds sterling and fluctuations in exchange rates could cause these amounts to increase or decrease from time to time.

In January 2017, the Company completed the acquisition of certain subscriber relationships from a third party. This acquisition did not meet the definition of a business under ASC 2017-01, Business Combinations (Topic 805)-Clarifying the Definition of a Business, which the Company adopted on October 1, 2016. The Company ascribed $100 of the initial purchase price to the acquired subscriber relationships definite-lived intangible assets with an initial estimated useful life of 10 years. Under the asset purchase agreement, the purchase price includes a component of contingent consideration under which the Company is required to pay a percentage of recurring revenues received from the acquired subscriber relationships through 2026 up to a maximum annual payment of $114. As the acquisition did not represent a business combination, the contingent consideration arrangement is recognized only when the contingency is resolved and the consideration is paid or becomes payable. The amounts payable under the contingent consideration arrangement, if any, will be included in the measurement of the cost of the acquired subscriber relationships. During the year ended December 31, 2017, $33 in consideration was earned under the contingent consideration arrangement.

Intangible assets are subject to amortization. The following table summarizes other intangible assets as of December 31, 2017 and 2016, respectively:



	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
December 31, 2017
Subscriber relationships	$	17,912	$	8,347	$	9,565
Distribution rights	4,385		1,450		2,935
Internally developed software	2,324		2,206		118
Proprietary content	8,223		5,908		2,315
Intellectual property	2,284		2,284		—
Favorable lease	648		461		187
	$	35,776	$	20,656	$	15,120
December 31, 2016
Subscriber relationships	$	16,888	$	6,431	$	10,457
Distribution rights	4,122		1,180		2,942
Internally developed software	2,301		1,904		397
Proprietary content	7,960		4,431		3,529
Intellectual property	2,284		2,056		228
Favorable lease	627		342		285
	$	34,182	$	16,344	$	17,838

Amortization expense related to intangible assets was $4,312, $4,956, and $5,526 for years ended December 31, 2017, 2016, and 2015, respectively.

Amortization expense related to intangible assets for the years ended years ended December 31, 2017, 2016, and 2015 was as follows:



Expense Category	2017		2016		2015
Cost of service sales	$	1,477	$	2,068	$	1,978
General administrative expense	2,835		2,888		3,548
Total amortization expense	$	4,312	$	4,956	$	5,526

As of December 31, 2017, the total weighted average remaining useful lives of the definite-lived intangible assets was 4.2 years and the weighted average remaining useful lives by the definite-lived intangible asset category are as follows:



Intangible Asset	Weighted Average Remaining Useful Life in Years
Subscriber relationships	4.9
Distribution rights	10.3
Internally developed software	0.4
Proprietary content	1.5
Favorable lease	1.5

Estimated future amortization expense for intangible assets recorded by the Company at December 31, 2017 is as follows:



Years ending December 31,	Amortization Expense
2018	$	4,082
2019	3,122
2020	2,292
2021	2,292
2022	1,505
Thereafter	1,827
Total amortization expense	$	15,120

The changes in the carrying amount of intangible assets during the year ended December 31, 2017 is as follows:



	2017
Balance at January 1	$	17,838
Amortization expense	(4,312		)
Intangibles assets acquired in asset acquisition	133
Foreign currency translation adjustment	1,461
Balance at December 31	$	15,120

Goodwill is recorded when the consideration for an acquisition exceeds the fair value of net tangible and identifiable intangible assets acquired. All of the Company's goodwill as of December 31, 2017 relates to its mobile connectivity reportable segment. None of the Company's goodwill is deductible for tax purposes. The changes in the carrying amount of goodwill during the year ended December 31, 2017 is as follows:



	Goodwill
Balance at January 1, 2016	$	36,747
Foreign currency translation adjustment	(5,404		)
Balance at December 31, 2016	31,343
Foreign currency translation adjustment	2,529
Balance at December 31, 2017	$	33,872

- 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.

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