Note 10 - Fair Value Measurements

12 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

10. Fair Value Measurements

Our balance sheets include non-financial assets and liabilities that are measured at fair value on a non-recurring basis. Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value. These tiers include:

Level 1 – defined as observable inputs such as quoted prices in active markets for identical assets;

Level 2 – defined as observable inputs other than Level I prices such as quoted prices for similar assets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3 – defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. At each reporting period, we perform a detailed analysis of our assets and liabilities that are measured at fair value. All assets and liabilities for which the fair value measurement is based on significant unobservable inputs or instruments which trade infrequently and therefore have little or no price transparency are classified as Level 3.

Assets and Liabilites Measured at Fair Value on a Non-Recurring Basis

We have no non-financial assets and liabilities that are measured at fair value on a recurring basis. Property and equipment, intangible assets and goodwill are measured at fair value on a non-recurring basis (upon impairment). The intangible assets in the table below are measured at fair value on a non-recurring basis and are presented at fair value as of the date of impairment.

On July 31, 2012, the Company acquired certain assets of Informative Design Partners, a CFD consulting business. While the CFD business is consistently profitable and experiencing growth in revenue, its earnings have been less than the levels forecasted at the time of the acquisition. As a result, the Company concluded that the carrying value of the CFD business exceeded its fair value as of June 30, 2014 and recorded an impairment charge of approximately $1.0 million to reduce the book value of goodwill and the value of the acquired customer list. The Company used several methods to calculate the fair values, including discounted projected cash flows and multiples of historical earnings (all of which are Level 3 inputs according to FASB ASC 820, Fair Value Measurement).

Part of the acquisition price for the CFD consulting business includes contingent consideration to be paid in future years based upon whether the CFD business achieves certain earnings targets in those years. At the time of the acquisition, the Company estimated the value of future contingent consideration payments. Because the historical earnings of the CFD business have been less than those earnings targets, the Company reduced its estimate of the remaining liability for contingent consideration recorded and recorded an adjustment during the current fiscal year to reflect the reduced liability for contingent consideration

The following table represents the fair value hierarchy for non-financial assets measured at fair value on a non-recurring basis at June 30, 2014:

	Level 1		Level 2		Level 3		Total
Intangible assets
Customer list	$	—	$	—	$	438,000	$	438,000
Total	$	—	$	—	$	438,000	$	438,000

The carrying fair value of the Company’s CFD related customer list reflects a reduction in value of approximately $80,000, as a result of an impairment loss recognized in the year ended June 30, 2014. This asset is included in "Customer list" in the accompanying consolidated balance sheets.