Goodwill

The following table reflects goodwill allocated to each reporting segment at December 31, 2013 and 2012:



	Electricity			Gas		Water			Total Company
	(in thousands)
Goodwill balance at January 1, 2012
Goodwill before impairment	$	436,576		$	372,025	$	413,156		$	1,221,757
Accumulated impairment losses	(254,735		)	—		(330,112		)	(584,847		)
Goodwill, net	181,841			372,025		83,044			636,910

Goodwill acquired	36,540			9,561		—			46,101
Other	2,269			1,725		773			4,767
Effect of change in exchange rates	5,559			432		7,247			13,238

Goodwill balance at December 31, 2012
Goodwill before impairment	475,711			383,743		414,394			1,273,848
Accumulated impairment losses	(249,502		)	—		(323,330		)	(572,832		)
Goodwill, net	226,209			383,743		91,064			701,016

Goodwill impairment	(173,249		)	—		—			(173,249		)
Adjustments of previous acquisitions	3,958			—		—			3,958
Effect of change in exchange rates	3,314			11,135		2,404			16,853

Goodwill balance at December 31, 2013
Goodwill before impairment	493,610			394,878		429,783			1,318,271
Accumulated impairment losses	(433,378		)	—		(336,315		)	(769,693		)
Goodwill, net	$	60,232		$	394,878	$	93,468		$	548,578

During our annual goodwill impairment test, performed as of October 1, 2013, we performed the first step of the goodwill impairment test, in which we determined that the carrying value of the Electricity reporting unit exceeded its fair value, primarily due to delays in global smart grid projects and lower volumes and pricing pressures in certain regions in Europe and Asia/Pacific. The revised forecast for the Electricity business drove a decrease in the fair value of the reporting unit. As a result, we performed the second step of the goodwill impairment test for the Electricity reporting unit, which indicated a goodwill impairment of $173.2 million was necessary. This charge was recorded during the fourth quarter of 2013. We also tested the Gas and Water reporting units, in conjunction with our annual goodwill impairment testing. We used the qualitative assessment methodology, as we determined it was more likely than not that the fair values of these two reporting units exceeded their respective carrying values. As a result, we did not need to perform the quantitative impairment test for the Gas and Water reporting units, and no goodwill impairments were recognized. Refer to Note 1 for a description of our reporting units and the methods used to determine the fair values of our reporting units and to determine the amount of any goodwill impairment.

During the second quarter of 2013, we finalized the purchase price allocation related to the SmartSynch acquisition, which was completed on May 1, 2012, and recorded certain adjustments that are reflected in Adjustments of previous acquisitions above. These adjustments primarily affected the fair value calculation of certain accrued liabilities associated with specific contracts. Among these adjustments is the correction of an error associated with a long-term revenue contract acquired from SmartSynch. In May 2013, we determined that certain manufacturing costs were not reflected in the model used to value this contract at acquisition. Once these costs were properly added to the total cost and profitability estimates, we determined the total contract would result in a loss of $2.4 million over the contract term. Therefore, we recognized a liability for this expected loss on the contract and made a corresponding adjustment to goodwill. Further, we had previously recognized a customer relationship intangible asset of $1.5 million associated with this contract, with amortization scheduled to begin in 2014 based on the contract's original projected cash flow. Since the contract is in an overall loss position, we determined that the intangible asset had no value. We reduced the value of this intangible asset to zero with a corresponding adjustment to goodwill. In accordance with relevant accounting guidance, we evaluated the materiality of the error from a qualitative and quantitative perspective. Based on such evaluation, we concluded that recognizing the contract liability and adjusting the intangible asset value during the three months ended June 30, 2013 would not be material, quantitatively or qualitatively, to our results of operations for the three months ended June 30, 2013 or our expected full year results of operations for 2013 and would not have had a material impact on our results for the year ended December 31, 2012. Because these adjustments were not material individually or in aggregate, we did not retrospectively adjust the comparative amounts on the Consolidated Balance Sheet as of December 31, 2012.

In the preceding table, "Other" includes activities associated with our restructuring projects announced in the fourth quarter of 2011. During the third quarter of 2012, we identified an error in our consolidated financial statements for the year ended December 31, 2011, which resulted in an overstatement of restructuring expense related to the expected sale of a non-core business. The identified assets to be disposed originally included $6.7 million of goodwill, which was impaired and charged to restructuring expense as a result of the expected sale proceeds being less than the carrying value of the identified assets. During the third quarter of 2012, we determined the amount of goodwill that should have been allocated to the asset disposal group was $1.3 million. In accordance with the relevant guidance, management evaluated the materiality of the error from a qualitative and quantitative perspective. Based on such evaluation, we concluded that correcting the goodwill allocated to this business asset group was not material, quantitatively or qualitatively, to our results of operations for the year ended December 31, 2012 and would not have had a material impact on our results for the year ended December 31, 2011. Accordingly, we recorded a non-cash adjustment during the third quarter of 2012 to reduce restructuring expense and increase goodwill by $5.4 million. Additionally, in 2012, we sold a non-core business in Europe to which we allocated $675,000 of goodwill, which was recognized as restructuring expense.

Goodwill and accumulated impairment losses associated with our international subsidiaries are recorded in their respective functional currencies; 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.