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GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2010

NOTE 5—GOODWILL AND INTANGIBLE ASSETS

The Company tests goodwill and indefinite-lived intangible assets for impairment annually or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or the fair value of an indefinite-lived intangible asset below its carrying value. The Company also reviews definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of a definite-lived intangible asset may not be recoverable. The Company performed its annual assessment for impairment of goodwill and indefinite-lived intangible assets as of October 1 in connection with the preparation of its annual financial statements.

In connection with its annual assessment in 2010, the Company identified and recorded impairment charges at the Media & Other segment related to the write-down of the goodwill and indefinite-lived intangible assets of Shoebuy of $28.0 million and $4.5 million, respectively, and at the Search segment related to the write-down of an indefinite-lived intangible asset of IAC Search & Media of $11.0 million. The indefinite-lived intangible asset impairment charge at Shoebuy relates to trade names and trademarks. The goodwill and indefinite-lived intangible asset impairment charges at Shoebuy reflect expectations of lower revenue and profit performance in future years due to Shoebuy's 2010 fourth quarter revenue and profit performance, which is its seasonally strongest quarter. The indefinite-lived intangible asset impairment charge at IAC Search & Media is primarily due to lower future revenue projections associated with a trade name and trademark based largely upon the impact of 2010's full year results.

In connection with its annual assessment and its review of definite-lived intangible assets in 2009, the Company identified and recorded impairment charges at the Search segment related to the write-down of the goodwill and indefinite-lived and definite-lived intangible assets of IAC Search & Media of $916.9 million, $104.1 million and $24.2 million, respectively. The goodwill and indefinite-lived intangible asset impairment charges reflected lower projections for revenue and profits at IAC Search & Media in future years that reflected the Company's consideration of industry growth rates, competitive dynamics and IAC Search & Media's operating strategies and the impact of these factors on the fair value of IAC Search & Media and its goodwill and indefinite-lived intangible assets. The indefinite-lived intangible asset impairment charge related to trade names and trademarks. The definite-lived intangible asset impairment charge primarily related to certain technology and advertiser relationships, the carrying values of which were no longer considered recoverable based upon an assessment of future cash flows related to these assets. Accordingly, these assets were written down to fair value.

In connection with its annual assessment in 2008, the Company identified and recorded impairment charges related to the write-down of the goodwill and indefinite-lived intangible assets of Connected Ventures, which is included in the Media & Other segment, of $11.6 million and $3.4 million, respectively, and the indefinite-lived intangible assets of the Search segment of $9.2 million. The impairment at Connected Ventures resulted from the Company's assessment of its future profitability. The impairment at the Search segment primarily resulted from the decline in revenue and profitability at IAC Search & Media's Excite, iWon and MyWay portals businesses.

The Company determines the fair values of its reporting units using discounted cash flow ("DCF") analyses, and typically corroborates the concluded fair value using a market based valuation approach. Determining fair value requires the exercise of significant judgment, including judgment about the amount and timing of expected future cash flows and appropriate discount rates. The expected cash flows used in the DCF analyses are based on the Company's most recent budget and, for years beyond the budget, the Company's estimates, which are based, in part, on forecasted growth rates. The discount rates used in the DCF analyses reflect the risks inherent in the expected future cash flows of the respective reporting units. Assumptions used in the DCF analyses, including the discount rate, are assessed annually based on the reporting units' current results and forecast, as well as macroeconomic and industry specific factors. The discount rates used in the Company's annual goodwill impairment assessment ranged from 13% to 20% in both 2010 and 2009.

The Company determines the fair values of its indefinite-lived intangible assets using avoided royalty DCF analyses. Significant judgments inherent in these analyses include the selection of appropriate royalty and discount rates and estimating the amount and timing of expected future cash flows. The discount rates used in the DCF analyses reflect the risks inherent in the expected future cash flows generated by the respective intangible assets. The royalty rates used in the DCF analyses are based upon an estimate of the royalty rates that a market participant would pay to license the Company's trade names and trademarks. Assumptions used in the avoided royalty DCF analyses, including the discount rate and royalty rate, are assessed annually based on the actual and projected cash flows related to the asset, as well as macroeconomic and industry specific factors. The discount rates used in the Company's annual indefinite-lived impairment assessment ranged from 13% to 20% in both 2010 and 2009, and the royalty rates used ranged from 1% to 10% in both 2010 and 2009.

The indefinite-lived and definite-lived intangible asset impairment charges are included in amortization of intangibles in the accompanying consolidated statement of operations.

The balance of goodwill and intangible assets, net is as follows (in thousands):

		December 31,

		2010		2009
Goodwill		$	989,493	$	967,735
Intangible assets with indefinite lives			237,021		245,737
Intangible assets with definite lives, net			8,023		15,195

	Total goodwill and intangible assets, net	$	1,234,537	$	1,228,667

The following table presents the balance of goodwill by reporting unit, including the changes in the carrying value of goodwill, for the year ended December 31, 2010 (in thousands):

		Balance as of January 1, 2010		Additions		(Deductions)			Impairment			Foreign Exchange Translation			Balance as of December 31, 2010

	IAC Search & Media	$	527,604	$	7,323	$	(923	)	$	—		$	—		$	534,004
	CityGrid Media		17,450		—		—			—			—			17,450

Search			545,054		7,323		(923	)		—			—			551,454
Match			253,812		37,375		—			—			6,787			297,974
ServiceMagic			110,689		—		—			—			(772	)		109,917
	Shoebuy		49,744		—		—			(28,032	)		—			21,712
	Connected Ventures		8,436		—		—			—			—			8,436

Media & Other			58,180		—		—			(28,032	)		—			30,148

	Total	$	967,735	$	44,698	$	(923	)	$	(28,032	)	$	6,015		$	989,493

Additions principally relate to the acquisitions of Meetic's Latin American operations ("Parperfeito") on March 10, 2010, Singlesnet on March 2, 2010 and DailyBurn.com on May 18, 2010. The December 31, 2010 goodwill balance includes accumulated impairment losses of $916.9 million, $28.0 million and $11.6 million at IAC Search & Media, Shoebuy and Connected Ventures, respectively.

The following table presents the balance of goodwill by reporting unit, including the changes in the carrying value of goodwill, for the year ended December 31, 2009 (in thousands):

		Balance as of January 1, 2009		Additions		(Deductions)			Impairment			Foreign Exchange Translation			Balance as of December 31, 2009

	IAC Search & Media	$	1,451,767	$	—	$	(7,298	)	$	(916,868	)	$	3		$	527,604
	CityGrid Media		9,330		8,120		—			—			—			17,450

Search			1,461,097		8,120		(7,298	)		(916,868	)		3			545,054
Match			225,558		62,365		(41,876	)		—			7,765			253,812
ServiceMagic			107,369		4,014		(1,760	)		—			1,066			110,689
	Shoebuy		49,744		—		—			—			—			49,744
	ReserveAmerica		25,415		—		(25,109	)		—			(306	)		—
	Connected Ventures		8,436		—		—			—			—			8,436

Media & Other			83,595		—		(25,109	)		—			(306	)		58,180

	Total	$	1,877,619	$	74,499	$	(76,043	)	$	(916,868	)	$	8,528		$	967,735

Additions principally relate to the acquisition of People Media on July 13, 2009. Deductions principally relate to the sale of Match Europe on June 5, 2009 and the sale of ReserveAmerica on January 31, 2009. IAC Search & Media's goodwill at December 31, 2009 includes accumulated impairment losses of $916.9 million. Connected Ventures' goodwill at January 1, 2009 and December 31, 2009 includes accumulated impairment losses of $11.6 million.

Intangible assets with indefinite-lives relate to trade names and trademarks acquired in various acquisitions. At December 31, 2010, intangible assets with definite lives relate to the following (in thousands):

		Cost		Accumulated Amortization			Net

Supplier agreements		$	7,100	$	(4,668	)	$	2,432	6.7
Customer lists			5,534		(5,298	)		236	1.3
Technology			3,100		(1,817	)		1,283	3.0
Other			8,871		(4,799	)		4,072	4.2

	Total	$	24,605	$	(16,582	)	$	8,023

At December 31, 2009, intangible assets with definite-lives relate to the following (in thousands):

		Cost		Accumulated Amortization			Net

Supplier agreements		$	17,020	$	(12,207	)	$	4,813	6.0
Customer lists			8,019		(6,494	)		1,525	1.2
Technology			5,958		(3,579	)		2,379	3.6
Other			16,074		(9,596	)		6,478	3.6

	Total	$	47,071	$	(31,876	)	$	15,195

Amortization of intangible assets with definite-lives is computed on a straight-line basis and, based on December 31, 2010 balances, such amortization is estimated to be as follows (in thousands):

Years Ending December 31,

2011	$	4,116
2012		2,472
2013		1,366
2014		69

	$	8,023

- Definition

Discloses 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 or 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. This element may be used as a single block of text to include the entire intangible asset disclosure including data and tables.

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