Ameresco, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Goodwill and Intangible Assets

Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying value of goodwill attributable to each reportable segment are as follows:



	U.S. Regions		U.S. Federal		Canada			Other			Total
Balance, December 31, 2015	$	24,759	$	3,375	$	3,162		$	27,789		$	59,085
Currency effects	—		—		100			(1,209		)	(1,109		)
Balance, December 31, 2016	24,759		3,375		3,262			26,580			57,976
Sale of assets of a business	—		—		—			(2,639		)	(2,639		)
Currency effects	—		—		232			566			798
Balance, December 31, 2017	$	24,759	$	3,375	$	3,494		$	24,507		$	56,135
Accumulated Goodwill Impairment Balance, December 31, 2016	$	—	$	—	$	(1,016	)	$	—		$	(1,016	)
Accumulated Goodwill Impairment Balance, December 31, 2017	$	—	$	—	$	(1,016	)	$	—		$	(1,016	)

In accordance with ASC 350, goodwill was tested for impairment as of December 31, 2017, 2016 and 2015 at the reporting unit level under the income approach which uses, in part, a discounted cash flow method and a peer-based, risk-adjusted weighted average cost of capital. No instances of impairment were identified in the December 31, 2017, 2016 or 2015 assessments. Based on the Company’s goodwill impairment assessment, all of its reporting units with goodwill had estimated fair values as of December 31, 2017 that exceeded their carrying values by at least 20%. However, during the course of the valuation analysis it was determined that although the fair value of the Company’s Canada reporting unit exceeded the carrying amount of this reporting unit the carrying value of the reporting unit was negative, as of December 31, 2017. The Canada reporting unit had goodwill of $3,494 as of December 31, 2017

Based on the Company’s goodwill impairment assessment, all of its reporting units with goodwill had estimated fair values as of December 31, 2016 that exceeded their carrying values by at least 13%, with the exception of the Southwest reporting unit, a member of the U.S. Regions segment, which had a fair value that exceeded its carrying value by 9%. This reporting unit had goodwill of $16,800 at December 31, 2016. During the course of the valuation analysis it was determined that although the fair value of the Company’s Canada reporting unit exceeded the carrying amount of this reporting unit the carrying value of the Canada reporting unit was negative for the year ended December 31, 2016. This determination, combined with qualitative considerations, prompted the performance of the Step 2 test which had previously been prescribed under ASC 350, recognizing and measuring the amount of the impairment loss, if any. Step 2 of the goodwill impairment test compared the implied fair value of the reporting unit’s goodwill with the carrying amount of the goodwill. Under the Step 2 test, the fair value of this goodwill can only be measured as a residual after the entity assigns the fair value of the reporting unit to all the assets and liabilities of that reporting unit, including any unrecognized intangible assets as if the reporting unit had been acquired in a business combination. The implied fair value of the goodwill of the Canada reporting unit exceeded the carrying value of that goodwill and as a result, no impairment of goodwill had been identified.

The gross carrying amount and accumulated amortization of intangible assets are as follows:



	As of December 31,
	2017		2016
Gross Carrying Amount
Customer contracts	$	7,786	$	7,594
Customer relationships	11,863		11,652
Non-compete agreements	3,052		3,203
Technology	2,751		2,716
Trade names	546		542
	25,998		25,707
Accumulated Amortization
Customer contracts	7,786		7,566
Customer relationships	9,557		8,048
Non-compete agreements	3,048		3,158
Technology	2,642		2,485
Trade names	525		519
	23,558		21,776
Intangible assets, net	$	2,440	$	3,931

Amortization expense related to customer contracts is included in cost of revenues in the consolidated statements of income (loss). All customer contracts intangible assets were fully amortized as of December 31, 2017. Amortization expense related to customer relationships, non-compete agreements, technology and trade names is included in selling, general and administrative expenses in the consolidated statements of income (loss).

Customer contracts are amortized ratably over the period of the acquired customer contracts ranging in periods from approximately one to five years. All other intangible assets are amortized over periods ranging from approximately four to fifteen years, as defined by the nature of the respective intangible asset.

Separable intangible assets that are not deemed to have indefinite lives are amortized over their useful lives. The Company annually assesses whether a change in the life over which the Company’s assets are amortized is necessary or more frequently if events or circumstances warrant. No changes to useful lives were made during the years ended December 31, 2017, 2016 and 2015.

Amortization expense for the years ended December 31, 2017, 2016 and 2015 is as follows:



	Year Ended December 31,
	2017		2016		2015
Customer contracts	$	31	$	184	$	932
Customer relationships	1,244		1,809		2,139
Non-compete agreements	42		116		494
Technology	128		238		528
Trade names	6		11		57
Total intangible amortization expense	$	1,451	$	2,358	$	4,150

Estimated amortization expense for existing intangible assets for the next five succeeding fiscal years is as follows:



	Estimated Amortization
	Included in Selling, General and Administrative Expenses
2018	$	992
2019	716
2020	515
2021	193
2022	14

- 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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