Goodwill and Intangible Assets

6 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

12. Goodwill and Intangible Assets

The table below summarizes goodwill balances by reporting unit (in thousands):

	December 31,		June 30,		December 31,
Reporting Unit	2019		2019		2018
Chamberlain	$	4,716	$	4,716	$	4,716
AUC		68,321		68,321		68,321
RUSM and RUSVM		237,173		237,173		237,173
Financial Services		376,595		377,046		317,384
Total	$	686,805	$	687,256	$	627,594

The table below summarizes goodwill balances by reportable segment (in thousands):

	December 31,		June 30,		December 31,
Reportable Segment	2019		2019		2018
Medical and Healthcare	$	310,210	$	310,210	$	310,210
Financial Services		376,595		377,046		317,384
Total	$	686,805	$	687,256	$	627,594

The table below summarizes the changes in goodwill balances by reportable segment (in thousands):

	Medical and		Financial
	Healthcare		Services		Total
June 30, 2018	$	310,210	$	317,699	$	627,909
Foreign exchange rate changes		—		(315)		(315)
December 31, 2018		310,210		317,384		627,594
Acquisitions		—		59,519		59,519
Foreign exchange rate changes		—		143		143
June 30, 2019		310,210		377,046		687,256
Purchase accounting adjustments		—		(92)		(92)
Foreign exchange rate changes		—		(359)		(359)
December 31, 2019	$	310,210	$	376,595	$	686,805

The decrease in the goodwill balance from June 30, 2019 in the Financial Services segment is primarily the result of a change in the value of the Indian Rupee compared to the U.S. dollar. Since EduPristine’s goodwill is recorded in local currency, fluctuations in the values of the Indian Rupee in relation to the U.S. dollar will cause changes in the balance of this asset.

Intangible assets consist of the following (in thousands):

	December 31, 2019
	Gross				Weighted-Average
	Carrying		Accumulated		Amortization
	Amount		Amortization		Period
Amortizable intangible assets:
Customer relationships	$	68,900	$	(17,591)	10 Years
Curriculum/software		11,600		(1,128)	6 Years
Course delivery technology		7,200		(1,219)	5 Years
Total	$	87,700	$	(19,938)
Indefinite-lived intangible assets:
Trade names	$	95,734
Chamberlain Title IV eligibility and accreditations		1,200
AUC Title IV eligibility and accreditations		100,000
Ross Title IV eligibility and accreditations		14,100
Intellectual property		13,940
Total	$	224,974

	June 30, 2019
	Gross
	Carrying		Accumulated
	Amount		Amortization
Amortizable intangible assets:
Customer relationships	$	69,300	$	(14,448)
Curriculum/software		16,600		(5,193)
Course delivery technology		7,200		(487)
Total	$	93,100	$	(20,128)
Indefinite-lived intangible assets:
Trade names	$	95,777
Chamberlain Title IV eligibility and accreditations		1,200
AUC Title IV eligibility and accreditations		100,000
Ross Title IV eligibility and accreditations		14,100
Intellectual property		13,940
Total	$	225,017

	December 31, 2018
	Gross
	Carrying		Accumulated
	Amount		Amortization
Amortizable intangible assets:
Customer relationships	$	42,900	$	(11,913)
Curriculum/software		5,000		(4,167)
Course delivery technology		500		(312)
Total	$	48,400	$	(16,392)
Indefinite-lived intangible assets:
Trade names	$	77,365
Chamberlain Title IV eligibility and accreditations		1,200
AUC Title IV eligibility and accreditations		100,000
Ross Title IV eligibility and accreditations		14,100
Intellectual property		13,940
Total	$	206,605

The table below summarizes the indefinite-lived intangible asset balances by reportable segment (in thousands):

	December 31,		June 30,		December 31,
Reportable Segment	2019		2019		2018
Medical and Healthcare	$	137,500	$	137,500	$	137,500
Financial Services		87,474		87,517		69,105
Total	$	224,974	$	225,017	$	206,605

Amortization expense for amortized intangible assets was $2.6 million and $5.1 million for the three and six months ended December 31, 2019, respectively, and $1.6 million and $3.2 million for the three and six months ended December 31, 2018, respectively. Estimated amortization expense for amortizable intangible assets for the next five fiscal years ending June 30 and in the aggregate, by reporting unit, is as follows (in thousands):

	Financial
Fiscal Year	Services
2020 (remaining)	$	5,152
2021		10,073
2022		9,944
2023		9,792
2024		9,509
Thereafter		23,292
Total	$	67,762

All amortizable intangible assets except ACAMS customer relationships are amortized on a straight-line basis. The amount amortized for ACAMS customer relationships is based on the estimated retention of the customers, giving consideration to the revenue and cash flow associated with these existing customers.

Indefinite-lived intangible assets related to trade names, Title IV eligibility and accreditations, and intellectual property are not amortized, as there are no legal, regulatory, contractual, economic or other factors that limit the useful life of these intangible assets to the reporting entity.

In accordance with GAAP, goodwill and indefinite-lived intangibles arising from a business combination are not amortized and charged to expense over time. Instead, these assets must be reviewed annually for impairment or more frequently if circumstances arise indicating potential impairment. Adtalem’s annual impairment review was most recently completed as of May 31, 2019, at which time there was no impairment loss associated with recorded goodwill or indefinite-lived intangible assets for any reporting unit.

Adtalem has four reporting units that contained goodwill as of the second quarter of fiscal year 2020. These reporting units constitute components for which discrete financial information is available and regularly reviewed by segment management. If the carrying amount of a reporting unit containing the goodwill exceeds the fair value of that reporting unit, an impairment loss to goodwill is recognized. In analyzing the results of operations and business conditions of all the reporting units, as of December 31, 2019, it was determined that no triggering event had occurred that would indicate the carrying value of a reporting unit had exceeded its fair value.

Adtalem has four reporting units that contained indefinite-lived intangible assets as of the second quarter of fiscal year 2020. For indefinite-lived intangible assets, management first analyzes qualitative factors including results of operations and business conditions of the four reporting units that contained indefinite-lived intangible assets, significant changes in cash flows at the individual indefinite-lived intangible asset level, if applicable, as well as how much previously calculated fair values exceed carrying values to determine if it is more likely than not that the intangible assets associated with these reporting units have been impaired.

These interim triggering event conclusions were based on the fact that the annual impairment review of Adtalem’s reporting units and indefinite-lived intangible assets resulted in no impairment indicators as of the end of fiscal year 2019, and that no interim events or deviations from planned operating results occurred as of December 31, 2019 that would cause management to reassess these conclusions.

Determining the fair value of a reporting unit or an intangible asset involves the use of significant estimates and assumptions. Management bases its fair value estimates on assumptions it believes to be reasonable at the time, but such assumptions are subject to inherent uncertainty. Actual results may differ from those estimates, which could lead to future impairments of intangible assets or goodwill.