Goodwill and Other Intangible Assets

6 Months Ended

May 31, 2013

Goodwill And Intangible Assets Disclosure [Abstract]

Note 13.

Goodwill and Other Intangible Assets

In connection with the Merger Transaction, goodwill of $1.7 billion was recorded on March 1, 2013. In addition, as of March 1, 2013, certain existing intangible assets and new intangible assets were identified and recorded at their fair values. See Note 4, Leucadia Merger and Related Transactions for further information.

Goodwill

The following table is a summary of the changes to goodwill for the three months ended May 31, 2013, three months ended February 28, 2013 and twelve months ended November 30, 2012 (in thousands):


	Successor			Predecessor
	Three Months Ended May 31, 2013			Three Months Ended February 28, 2013			Twelve Months Ended November 30, 2012

Balance, at beginning of period	$	1,701,616		$	365,670		$	365,574
Add: Contingent consideration		—			2,394			—
Add: Translation adjustments		(2,210	)		(1,287	)		96

Balance, at end of period	$	1,699,406		$	366,777	(1)	$	365,670

(1)	Predecessor Company goodwill as of February 28, 2013 was reduced to $-0- as of March 1, 2013, as a result of purchase accounting adjustments.

Contingent consideration recorded during the three months ended February 28, 2013 relates to the lapse of certain conditions as specified in the purchase agreements associated with the acquisition of LongAcre Partners in 2007.

At least annually, and more frequently if warranted, we assess goodwill for impairment. Estimating the fair value of a reporting unit and/ or assessing the effect of events and change in circumstances on the fair value of a reporting unit requires significant judgment and often involves the use of significant estimates and assumptions. These estimates and assumptions could have a significant effect on whether or not an impairment charge is recognized and the magnitude of such a charge. Further, adverse market or economic events in the future could result in impairment charges in future periods. As part of the push down of the acquisition method of accounting for the Merger Transaction and the resulting creation of a new Successor reporting entity, our annual goodwill impairment testing date is designated as August 1. Prior to the merger, our annual goodwill impairment test date was June 1.

As of May 31, 2013, goodwill of $1,644.3 million and $55.1 million is assigned to our Capital Markets and Asset Management segments, respectively.

Intangible Assets

The following tables present the gross carrying amount, accumulated amortization, net carrying amount and weighted average amortization period of identifiable intangible assets as of May 31, 2013 and November 30, 2012 (in thousands):


	Successor
	May 31, 2013
	Gross cost		Accumulated amortization			Net carrying amount		Weighted average remaining lives (years)
Customer relationships	$	136,002	$	(5,650	)	$	130,352		14.4
Trade name		131,299		(938	)		130,361		34.8
Exchange and clearing organization membership interests and registrations		16,060		—			16,060		N/A

	$	283,361	$	(6,588	)	$	276,773


	Predecessor
	November 30, 2012
	Gross cost		Impairment losses			Accumulated amortization			Net carrying amount		Weighted average remaining lives (years)
Customer relationships	$	10,542	$	—		$	(4,107	)		6,435		7.9
Trade name		1,680		—			(1,287	)		393		3.5
Other		100		—			(15	)		85		12.8
Exchange and clearing organization membership interests and registrations		11,219		(2,873	)		—		$	8,346		N/A

	$	23,541	$	(2,873	)	$	(5,409	)	$	15,259

Intangible assets with an indefinite useful life are not amortized but assessed annually for impairment, or more frequently when certain events or circumstances exist. Subsequent to the merger, our annual impairment testing date is August 1. Prior to the merger, our annual impairment testing date was June 1. During the second fiscal quarter of 2012, as a result of a significant decline in the fair value of our exchange and clearing organization membership interests and registrations we recognized an impairment loss of $2.9 million. Fair values were based on prices of public sales which had declined over the past year.

Regarding intangible assets with a finite life, aggregate amortization expense for the three months ended May 31, 2013 and February 28, 2013 was $6.8 million and $0.4 million, respectively, and $0.6 million and $1.2 million for the three and six months ended May 31, 2012, respectively, which is included in Other expenses on the Consolidated Statements of Earnings.

Estimated future amortization expense for the next five fiscal years are as follows (in thousands):


Fiscal year	Estimated future amortization expense

2013	$	13,541
2014		12,682
2015		12,682
2016		12,682
2017		12,682

Mortgage Servicing Rights

On November 30, 2012, (Predecessor period), we sold substantially all of our mortgage servicing rights for military housing for approximately $30.9 million; and on May 20, 2013 (Successor period) we sold the remaining servicing rights for $2.0 million.

Mortgage servicing rights for military housing mortgage loans are accounted for as an intangible asset and included within Other assets in the Consolidated Statements of Financial Condition. The mortgage servicing rights are amortized over the period of the estimated net servicing income, which is reported in Other revenues in the Consolidated Statements of Earnings. We provide no credit support in connection with the servicing of these loans and are not required to make servicing advances on the loans in the underlying portfolios. We determined that the servicing rights represent one class of servicing rights based on the availability of market inputs to measure the fair value of the asset and our treatment of the asset as one aggregate pool for risk management purposes. We earned fees related to these servicing rights of $104,000 and $114,000 during the three months ended May 31, 2013 and February 28, 2013 and $0.9 million and $1.9 million during the three and six months ended May 31, 2012, respectively.

The following presents the activity in the balance of these servicing rights for the three months ended May 31, 2013 and February 28, 2013 and year ended November 30, 2012 (in thousands):


	Successor			Predecessor
	Three Months Ended May 31, 2013			Three Months Ended February 28, 2013			Twelve Months Ended November 30, 2012

Balance, beginning of period	$	2,000		$	805		$	8,202
Add: Acquisition		—			—			162
Less: Sales, net		(2,000	)		—			(6,959	)
Less: Pay down		—			—			(211	)
Less: Amortization		—			(10	)		(389	)

Balance, end of period	$	—		$	795		$	805

- 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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