Goodwill

Effective January 1, 2012, our reporting segments were changed from two geographic operating segments, Itron North America and Itron International, to two product operating segments, Energy and Water. As a result, we reallocated the goodwill balance as of January 1, 2012 to the Electricity, Gas, and Water reporting units within these two operating segments.

The following table reflects the goodwill balance as of June 30, 2012 (in thousands):



	Total Company			Energy			Water
Balance at January 1, 2012
Goodwill before impairment	$	1,221,757		$	808,601		$	413,156
Accumulated impairment losses	(584,847		)	(254,735		)	(330,112		)
Goodwill, net	636,910			553,866			83,044

Goodwill acquired	42,620			42,620			—
Effect of change in exchange rates	(15,090		)	(18,466		)	3,376

Balance at June 30, 2012
Goodwill before impairment	1,201,767			812,057			389,710
Accumulated impairment losses	(537,327		)	(234,037		)	(303,290		)
Goodwill, net	$	664,440		$	578,020		$	86,420

Goodwill acquired in 2012 is based on the preliminary purchase price allocation relating to the SmartSynch acquisition on May 1, 2012. Refer to Note 16 for additional information regarding this acquisition.

As a result of the significant decline in the price of our shares of common stock at the end of September 2011, our aggregate market value was significantly lower than the aggregate carrying value of our net assets. As a result, we performed an impairment test of our goodwill as of September 30, 2011, and recorded total goodwill impairment charges of $584.8 million in the year ended December 31, 2011. These goodwill impairment charges were associated with our previous reporting units of Itron International Electricity and Itron International Water. The accumulated impairment losses were reallocated to our new operating segments, Energy and Water, effective January 1, 2012.

Goodwill and accumulated impairment losses associated with our international subsidiaries are recorded in their respective functional currency; therefore, the carrying amounts of these balances increase or decrease, with a corresponding change in accumulated OCI, due to changes in foreign currency exchange rates.