Goodwill and Intangible Assets

12 Months Ended

Mar. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill, Intangible Assets and Software Development Costs

Agilysys allocates the cost of its acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the cost over the fair value of the identified net assets acquired is recorded as goodwill.

Goodwill

Agilysys tests goodwill for impairment at the reporting unit level upon identification of impairment indicators, or at least annually. A reporting unit is the operating segment or one level below the operating segment (depending on whether certain criteria are met). Goodwill was allocated to our reporting units that are anticipated to benefit from the synergies of the business combinations generating the underlying goodwill. Agilysys has one operating segment.

We conducted our annual qualitative assessment (Step Zero Analysis) test on February 1, 2014 and 2013 to determine whether it would be necessary to perform the two-step goodwill impairment test. It was determined based on the Step Zero Analysis that it is more likely than not that the fair value of the operations exceeded its carrying amount.

The changes in the carrying amount of goodwill for the years ended March 31, 2014 and 2013 are as follows:



(In thousands)
Balance at March 31, 2012	$	135,285
Accumulated impairment losses as of March 31, 2012	(120,087		)
	15,198
Impact of foreign currency translation	(1,070		)
Balance at March 31, 2013	$	14,128
Acquisitions	3,444
Impact of foreign currency translation	196
Allocation of goodwill to UK entity	(610		)
Balance at March 31, 2014	$	17,158

Intangible Assets and Software Development Costs

The following table summarizes our intangible assets at March 31, 2014, and 2013:



	2014									2013
	Gross						Net			Gross						Net
	carrying			Accumulated			carrying			carrying			Accumulated			carrying
(In thousands)	amount			amortization			amount			amount			amortization			amount
Amortized intangible assets:
Customer relationships	$	10,775		$	(10,080	)	$	695		$	10,775		$	(9,179	)	$	1,596
Non-competition agreements	2,700			(2,473		)	227			2,700			(2,213		)	487
Developed technology	10,660			(10,156		)	504			10,055			(10,055		)	—
Patented technology	80			(80		)	—			80			(80		)	—
	24,215			(22,789		)	1,426			23,610			(21,527		)	2,083
Unamortized intangible assets:
Trade names	10,100			N/A			10,100			10,100			N/A			10,100
Accumulated impairment	(900		)	N/A			(900		)	(900		)	N/A			(900		)
	9,200			N/A			9,200			9,200			N/A			9,200
Total intangible assets	$	33,415		$	(22,789	)	$	10,626		$	32,810		$	(21,527	)	$	11,283

Software development costs	$	14,587		$	(270	)	$	14,317		$	9,493		$	—		$	9,493
Project expenditures not yet in use	12,397			—			12,397			5,579			—			5,579
Accumulated impairment	(9,493		)	N/A			(9,493		)	(9,493		)	N/A			(9,493		)
Total software development costs	$	17,491		$	(270	)	$	17,221		$	5,579		$	—		$	5,579

During the fourth quarter of 2012, it was determined that Guest 360™, a property management solution system, would no longer be offered to our customers. As a result, we impaired the entire remaining assets, $8.1 million of intangibles and $0.5 million of fixed assets, as well as the known costs associated with a transition plan for all of the existing customers off of this platform, of $1.1 million. In fiscal 2013, we recorded in an additional $0.1 million related to the costs associated with this asset impairment. These charges were classified within “Asset impairments and related charges” in the Consolidated Statements of Operations.

The following table summarizes our remaining estimated amortization expense relating to in service intangible assets.



	Estimated
	Amortization
(In thousands)	Expense
Fiscal year ending March 31,
2015	$	2,066
2016	1,140
2017	1,140
2018	1,140
2019	764
Total	$	6,250

Amortization expense relating to intangible assets was $1.2 million for the fiscal years ended March 31, 2014, 2013 and 2012. Amortization expense relating to developed technology software intangible assets, including Guest 360™ in fiscal 2012, for the fiscal years ended March 31, 2014, 2013 and 2012 was $0.3 million, $0.8 million and $1.7 million, respectively. Amortization expense for acquired and internally developed intangibles that are related to revenue generating products is included in Products cost of goods sold.

Capitalized software development costs that are internally developed are carried on our balance sheet at net realizable value, net of accumulated amortization. We capitalized approximately $13.7 million, $4.9 million and $2.5 million during fiscal 2014, 2013 and 2012, respectively.

- 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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