GOODWILL & INTANGIBLE ASSETS

Goodwill

The Company has two reporting units: (1) Service Assurance and (2) Security. At March 31, 2018, goodwill attributable to the Company's Service Assurance and Security reporting units was $1.2 billion and $555.9 million, respectively. At March 31, 2017, goodwill attributable to the Company's Service Assurance and Security reporting units was $1.2 billion and $548.5 million, respectively. Goodwill is tested for impairment at a 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, 2018.

In fiscal years 2018 and 2017, the Company's quantitative impairment tests indicated that goodwill was not impaired. The Company determined the fair values of its reporting units by preparing a discounted cash flow analysis using forward looking projections of the reporting units’ future operating results and by comparing the value of the reporting units to the implied market value of selected peers. The significant assumptions used in the discounted cash flow analysis include: revenue and revenue growth, selling margins, other operating expenditures, the discounted rate used to present value future cash flows and terminal growth rates. The discount rate used is a cost of equity method, which is essentially equal to the "market participant" weighted-average cost of capital (WACC). The Service Assurance and Security reporting units' goodwill fair value substantially exceeded their respective carrying value.

The change in the carrying amount of goodwill for the fiscal year ended March 31, 2018 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 fiscal years ended March 31, 2018 and 2017 are as follows (in thousands):




Balance at March 31, 2016	$	1,709,369
Goodwill attributable to the Avvasi acquisition	1,950
Purchase accounting adjustments	3,792
Foreign currency translation impact and other adjustments	3,051
Balance at March 31, 2017	$	1,718,162
Goodwill attributable to the Efflux acquisition	6,077
Foreign currency translation impact	(11,475		)
Balance as of March 31, 2018	$	1,712,764

Intangible Assets

The net carrying amounts of intangible assets were $831.4 million and $931.3 million at March 31, 2018 and 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 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.

In fiscal year 2018 and 2017, the Company's annual impairment tests indicated that the acquired trade name was not impaired. In the fourth quarter of fiscal year 2018, the Company performed a quantitative step 1 analysis of its non-amortizing trade name. The Company determined the fair value of its trade name using a forward-looking relief from royalty model. The significant assumptions used in the forward-looking relief from royalty method include: revenue growth, royalty rates and the discount rate. The non-amortizing trade name fair value substantially exceeded its carrying value.

During the fiscal years ended March 31, 2018 and 2017, the Company acquired technology licenses for $0.5 million and $1.0 million, respectively. These amounts are included within distributor relationships and are being amortized using the economic benefit method over a useful life of 3 years.

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, 2018 (in thousands):



	Cost		Accumulated Amortization			Net
Developed technology	$	259,758	$	(148,937	)	$	110,821
Customer relationships	845,490		(176,425		)	669,065
Distributor relationships and technology licenses	9,019		(5,389		)	3,630
Definite-lived trademark and trade name	44,387		(18,138		)	26,249
Core technology	7,345		(6,712		)	633
Net beneficial leases	336		(336		)	—
Non-compete agreements	317		(317		)	—
Leasehold interest	2,600		(2,130		)	470
Backlog	18,544		(18,544		)	—
Capitalized software	3,183		(1,621		)	1,562
Other	1,247		(903		)	344
	$	1,192,226	$	(379,452	)	$	812,774

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 during the fiscal years ended March 31, 2018, 2017, and 2016 (in thousands).



	Years Ended March 31,
	2018		2017		2016
Amortization of intangible assets included as:
Product revenue	$	9	$	11,438	$	6,747
Cost of product revenue	40,286		44,326		45,127
Operating expense	76,661		70,325		32,547
	$	116,956	$	126,089	$	84,421

The following is the expected future amortization expense at March 31, 2018 for the fiscal years ended March 31 (in thousands):



2019	$	130,108
2020	116,494
2021	80,232
2022	69,778
2023	62,045
Thereafter	354,117
Total	$	812,774

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 all amortizing intangible assets is 14.6 years.