Goodwill and Intangible Assets

9 Months Ended

May 31, 2012

Notes to Condensed Consolidated Financial Statements [Abstract]

Goodwill represents the excess of the purchase price over the fair value assigned to the assets acquired and liabilities assumed. Changes in the carrying amount of goodwill from August 31, 2011 to May 31, 2012 are as follows:



			Apollo Global
($ in thousands)	University of Phoenix		BPP			Other			Other Schools		Total Goodwill
Goodwill as of August 31, 2011	$	37,018	$	50,694		$	30,275		$	15,310	$	133,297
Goodwill acquired⁽¹⁾	34,794		—			—			—		34,794
Impairment⁽²⁾	—		—			(11,912		)	—		(11,912		)
Currency translation adjustment	—		(5,085		)	(2,876		)	—		(7,961		)
Goodwill as of May 31, 2012	$	71,812	$	45,609		$	15,487		$	15,310	$	148,218

⁽¹⁾ Goodwill acquired resulted from our acquisition of Carnegie Learning during the first quarter of fiscal year 2012. Refer to Note 5, Acquisitions.

⁽²⁾ We recorded an impairment charge of $11.9 million of UNIACC’s goodwill during the first quarter of fiscal year 2012. See below for further discussion.

Intangible assets, net consist of the following as of May 31, 2012 and August 31, 2011:



	May 31, 2012										August 31, 2011
($ in thousands)	Gross Carrying Amount		Accumulated Amortization			Effect of Foreign Currency Translation Loss			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Effect of Foreign Currency Translation Loss			Net Carrying Amount
Finite-lived intangible assets
Software and technology⁽¹⁾	$	42,389	$	(6,076	)	$	—		$	36,313	$	3,600	$	(3,450	)	$	—		$	150
Student and customer relationships⁽¹⁾	14,109		(5,593		)	(1,406		)	7,110		9,477		(6,538		)	(1,284		)	1,655
Copyrights	20,891		(15,262		)	(786		)	4,843		20,891		(11,521		)	(422		)	8,948
Other⁽²⁾	12,878		(10,024		)	(1,224		)	1,630		15,102		(9,049		)	(1,166		)	4,887
Total finite-lived intangible assets	90,267		(36,955		)	(3,416		)	49,896		49,070		(30,558		)	(2,872		)	15,640
Indefinite-lived intangible assets
Trademarks^{(1), (2)}	108,961		—			(5,083		)	103,878		98,849		—			(737		)	98,112
Accreditations and designations⁽²⁾	7,260		—			(472		)	6,788		7,456		—			(91		)	7,365
Total indefinite-lived intangible assets	116,221		—			(5,555		)	110,666		106,305		—			(828		)	105,477
Total intangible assets, net	$	206,488	$	(36,955	)	$	(8,971	)	$	160,562	$	155,375	$	(30,558	)	$	(3,700	)	$	121,117

⁽¹⁾ We acquired certain intangible assets during the first quarter of fiscal year 2012 as a result of our acquisition of Carnegie Learning. Refer to Note 5, Acquisitions.

⁽²⁾ We recorded an impairment charge of $4.9 million of UNIACC’s intangible assets during the first quarter of fiscal year 2012. See below for further discussion.

On September 1, 2011, we early adopted the principles of ASU 2011-08 which simplifies how an entity tests goodwill for impairment by providing an option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Our qualitative analysis may consider many factors, including general economic conditions, industry and market conditions, financial performance and key business drivers of the reporting unit, and potential changes to significant assumptions used in the most recent fair value analysis. If we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount based on our qualitative assessment, or that a qualitative assessment should not be performed for a reporting unit, we proceed with performing the two-step quantitative goodwill impairment test. For further discussion of our two step impairment test process, including valuation methods we employ and critical assumptions and estimates used in determining the fair value of a reporting unit, refer to our 2011 Annual Report on Form 10-K.

At May 31, 2012, we completed our annual goodwill impairment analysis for the following reporting units:


•	University of Phoenix,


•	ULA, and


•	Western International University.

For University of Phoenix and Western International University, we performed qualitative assessments that included consideration of the factors discussed above and the fact that the fair value of these reporting units exceeded their respective carrying values in their most recent annual tests by a substantial margin of at least 50%. Based on our assessments, we concluded that it was more likely than not that the fair value of each reporting unit was greater than its carrying value.

For our ULA reporting unit, we performed the step one quantitative goodwill impairment test and determined the fair value exceeded the carrying value of its net assets and its goodwill was not impaired. The excess as a percentage of fair value was approximately 25%. We determined fair value using the discounted cash flow valuation method which utilized key assumptions that were substantially consistent with our prior annual impairment test.

As of May 31, 2012, we also tested indefinite-lived intangibles consisting primarily of trademarks and accreditations totaling $17.3 million, which includes $14.1 million related to the Carnegie Learning trademark. We performed a fair value analysis of these indefinite-lived intangibles and determined there was no impairment.

UNIACC Reporting Unit

In November 2011, UNIACC was advised by the National Accreditation Commission of Chile that its institutional accreditation would not be renewed and therefore had lapsed. UNIACC has appealed the decision. The loss of accreditation from the National Accreditation Commission does not impact UNIACC’s ability to operate or confer degrees and does not directly affect UNIACC’s programmatic accreditations. However, this institutional accreditation is necessary for new UNIACC students to participate in government loan programs and for existing students to begin to participate in such programs for the first time. The loss of accreditation has reduced new enrollment in UNIACC’s degree programs due to the unavailability of the government loan programs. Based on these factors and related uncertainty, we revised our cash flow estimates and performed an interim goodwill impairment analysis for UNIACC in the first quarter of fiscal year 2012.

To determine the fair value of the UNIACC reporting unit in our interim step one analysis, we used a discounted cash flow valuation method using assumptions that we believe would be a reasonable market participant’s view of the impact of the loss of accreditation status and the increased uncertainty impacting UNIACC. We used significant unobservable inputs (Level 3) in our discounted cash flow valuation.

Our interim step one goodwill impairment analysis resulted in a lower estimated fair value for the UNIACC reporting unit as compared to its carrying value. Based on the estimated fair value of the UNIACC reporting unit and a hypothetical purchase price allocation, we determined the UNIACC reporting unit would have no implied goodwill. Additionally, our interim impairment tests for the trademark and accreditation intangibles utilized the same significant unobservable inputs (Level 3) and assumptions used in UNIACC’s interim goodwill analysis and resulted in minimal or no fair value. Accordingly, we determined UNIACC’s entire goodwill balance and the trademark and accreditation indefinite-lived intangibles totaling $11.9 million and $3.9 million, respectively, were impaired.

We also evaluated UNIACC’s remaining long-lived assets, including property and equipment and finite-lived intangibles, for recoverability and determined certain finite-lived intangibles were impaired totaling $1.0 million. In the first quarter of fiscal year 2012, UNIACC’s goodwill and other intangibles impairment charges in the aggregate were $16.8 million, with no income tax benefit as UNIACC’s goodwill and other intangibles are not deductible for tax purposes.

- 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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