GOODWILL

12 Months Ended

Dec. 31, 2018

GOODWILL

3. GOODWILL

ASC 350, "Intangibles-Goodwill and Other", establishes accounting and reporting requirements for goodwill and other intangible assets.  ASU 2017-04, "Intangibles–Goodwill and Other (Topic 350): Simplifying the Test of Goodwill Impairment", issued by the FASB in January 2017, simplifies the subsequent measurement of goodwill, as further described hereafter. Goodwill was $48.2 million and $40.9 million as of December 31, 2018 and 2017, respectively.  Of these amounts, goodwill was $7.9 million as of both December 31, 2018 and 2017 for the Company's CoreCivic Safety segment, and was $40.3 million and $33.0 million, respectively, for its CoreCivic Community segment. This goodwill was established in connection with multiple business combination transactions.  

Under the provisions of ASC 350, a company performs a qualitative assessment that may allow it to skip the annual two-step impairment test.  Under ASC 350, a company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary.  If the two-step impairment test is required, a company determines the fair value of a reporting unit using a collaboration of various common valuation techniques, including market multiples and discounted cash flows.  These impairment tests are required to be performed at least annually.  

ASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill by performing a hypothetical application of the acquisition method as of the date of the impairment test to measure a goodwill impairment charge.  This requirement is the second step in the annual two-step quantitative impairment test required under ASC 350.  Instead, entities will recognize an impairment charge based on the first step of the quantitative impairment test currently required, which is the measurement of the excess of a reporting unit's carrying amount over its fair value.  Entities will still have the option to perform a qualitative assessment to determine if the quantitative impairment test is necessary.  For public reporting entities such as CoreCivic, guidance in ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, and interim periods within those years.  Early adoption of the ASU is allowed for interim or annual goodwill impairment tests performed on testing dates on or after January 1, 2017.  CoreCivic adopted ASU 2017-04 in the third quarter of 2018. CoreCivic performed its impairment tests during the fourth quarter, in connection with CoreCivic's annual budgeting process, and concluded no impairments had occurred. CoreCivic will perform these impairment tests at least annually and whenever circumstances indicate the carrying value of goodwill may not be recoverable.

In March 2017, the Texas Department of Criminal Justice ("TDCJ") notified CoreCivic that, in light of the current economic climate, as well as the fiscal constraints and budget outlook for the next biennium, the TDCJ would not be awarding the contract for the Bartlett State Jail. The TDCJ had previously solicited proposals for the rebid of the Bartlett facility, along with three other facilities that CoreCivic managed for the state of Texas.  The managed-only contracts at the four facilities were scheduled to expire in August 2017.  However, in collaboration with the TDCJ, the decision was made to close the Bartlett facility on June 24, 2017.  In anticipation of the termination of the contract and closing of the Bartlett facility, CoreCivic recorded an asset impairment of $0.3 million during the first quarter of 2017 for the write-off of goodwill associated with the facility.  During the third quarter of 2017, CoreCivic was notified that the TDCJ selected other operators for the three remaining facilities the Company managed for the state of Texas.  CoreCivic had no goodwill associated with these three facilities.