GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

The Company has two reporting units: (1) Service Assurance and (2) Security. The Company assesses goodwill for impairment at the reporting unit level at least annually, or on an interim basis if an event occurs or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its carrying value. The Company completed its annual impairment test on January 31, 2017. The Company performed an interim quantitative test as of December 31, 2017 related to its fiscal year 2018 guidance change. The estimated fair value of both reporting units significantly exceeded their carrying value, as did the fair value of the non-amortizing trade name.

At December 31, 2017, goodwill attributable to our Service Assurance and Security reporting units was $1.2 billion and $555.3 million, respectively. At March 31, 2017, goodwill attributable to our Service Assurance and Security reporting units was $1.2 billion and $548.5 million, respectively.

The change in the carrying amount of goodwill for the nine months ended December 31, 2017 is due to the acquisition of Efflux and the impact of foreign currency translation adjustments related to asset balances that are recorded in currencies other than the U.S. Dollar.

The changes in the carrying amount of goodwill for the nine months ended December 31, 2017 are as follows (in thousands):



Balance at March 31, 2017	$	1,718,162
Goodwill attributable to the Efflux acquisition	6,077
Foreign currency translation impact	(7,868		)
Balance as of December 31, 2017	$	1,716,371

Intangible Assets

The net carrying amounts of intangible assets were $859.2 million and $931.3 million at December 31, 2017 and March 31, 2017, respectively. Intangible assets acquired in a business combination are recorded under the acquisition method of accounting at their estimated fair values at the date of acquisition. The Company amortizes intangible assets over their estimated useful lives, except for the acquired trade name which resulted from the Network General Central Corporation (Network General) acquisition, which has an indefinite life and thus is not amortized. The carrying value of the indefinite-lived trade name is evaluated for potential impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired.

Intangible assets include the indefinite-lived trade name with a carrying value of $18.6 million and the following amortizable intangible assets at December 31, 2017 (in thousands):



	Cost		Accumulated Amortization			Net
Developed technology	$	260,586	$	(140,225	)	$	120,361
Customer relationships	841,403		(155,874		)	685,529
Distributor relationships and technology licenses	6,949		(3,517		)	3,432
Definite-lived trademark and trade name	44,210		(16,653		)	27,557
Core technology	7,271		(6,522		)	749
Net beneficial leases	336		(336		)	—
Non-compete agreements	306		(306		)	—
Leasehold interest	2,600		(1,807		)	793
Backlog	18,419		(18,417		)	2
Capitalized software	3,183		(1,356		)	1,827
Other	1,208		(898		)	310
	$	1,186,471	$	(345,911	)	$	840,560

Intangible assets include the indefinite-lived trade name with a carrying value of $18.6 million and the following amortizable intangible assets at March 31, 2017 (in thousands):



	Cost		Accumulated Amortization			Net
Developed technology	$	254,005	$	(110,200	)	$	143,805
Customer relationships	831,731		(105,319		)	726,412
Distributor relationships and technology licenses	8,290		(3,068		)	5,222
Definite-lived trademark and trade name	43,817		(12,078		)	31,739
Core technology	7,108		(6,009		)	1,099
Net beneficial leases	336		(336		)	—
Non-compete agreements	278		(278		)	—
Leasehold interest	2,600		(998		)	1,602
Backlog	18,142		(18,133		)	9
Capitalized software	3,047		(594		)	2,453
Other	1,208		(880		)	328
	$	1,170,562	$	(257,893	)	$	912,669

Amortization included as product revenue consists of amortization of backlog. Amortization included as cost of product revenue consists of amortization of developed technology, distributor relationships and technology licenses, core technology and software. Amortization included as operating expense consists of all other intangible assets. The following table provides a summary of amortization expense for the three and nine months ended December 31, 2017 and 2016, respectively (in thousands):



	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2017		2016		2017		2016
Amortization of intangible assets included as:
Product revenue	$	3	$	2,850	$	7	$	8,596
Cost of product revenue	10,088		11,773		30,032		33,202
Operating expense	18,227		17,548		54,919		52,811
	$	28,318	$	32,171	$	84,958	$	94,609

The following is the expected future amortization expense at December 31, 2017 for the fiscal years ending March 31 (in thousands):



2018 (remaining three months)	$	28,345
2019	107,734
2020	98,383
2021	86,253
2022	75,116
Thereafter	444,729
	$	840,560

The weighted-average amortization period of developed technology and core technology is 11.5 years. The weighted-average amortization period for customer and distributor relationships is 16.1 years. The weighted-average amortization period for trademarks and trade names is 8.5 years. The weighted-average amortization period for leasehold interests is 5.6 years. The weighted-average amortization period for backlog is 2.0 years. The weighted-average amortization period for capitalized software is 4.0 years. The weighted-average amortization period for amortizing all intangible assets is 14.6 years.

- 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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