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, 2013

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			Small-Scale Infrastructure		Other		Total
Balance, December 31, 2011	$	23,708,555	$	3,374,967	$	2,874,383		$	—	$	17,923,441	$	47,881,346
Goodwill acquired during the year	—		—		1,886,945			—		134,315		2,021,260
Goodwill impairment	—		—		(1,016,325		)	—		—		(1,016,325		)
Currency effects	—		—		82,109			—		—		82,109
Balance, December 31, 2012	23,708,555		3,374,967		3,827,112			—		18,057,756		48,968,390
Goodwill acquired during the year	1,050,303		—		—			—		2,631,562		3,681,865
Currency effects	—		—		296,622			—		127,485		424,107
Balance, December 31, 2013	$	24,758,858	$	3,374,967	$	4,123,734		$	—	$	20,816,803	$	53,074,362
Accumulated Goodwill Impairment Balance, December 31, 2012	$	—	$	—	$	(1,016,325	)	$	—	$	—	$	(1,016,325	)
Accumulated Goodwill Impairment Balance, December 31, 2013	$	—	$	—	$	(1,016,325	)	$	—	$	—	$	(1,016,325	)

The measurement periods for purchase price allocations end as soon as information on the facts and circumstances becomes available, but do not exceed 12 months. Adjustments in purchase price allocations may require a recasting of the amounts allocated to goodwill retroactively to the periods in which the acquisitions occurred.

In accordance with ASC 350, goodwill was tested for impairment as of December 31, 2013, 2012 and 2011 at the reporting unit level using a discounted cash flow method under the income approach and with a peer-based, risk-adjusted weighted average cost of capital. No instances of impairment were identified in the December 31, 2013 or 2011 assessments. Based on the Company’s goodwill impairment assessment, all of the Company’s reporting units with goodwill had estimated fair values as of December 31, 2013 that exceeded their carrying values by greater than 11%.

Upon completion of the annual step 1 assessment for the year ended December 31, 2012, Canada goodwill related to the Byrne acquisition (acquired in November 2009), was determined to be likely impaired. The impairment was the result of its fair value at the measurement date being less than its carrying amount. As the annual assessment indicated that Byrne’s carrying value exceeded its estimated fair value, a second phase of the goodwill impairment test (“Step 2”) was performed specific to Byrne. Under Step 2, the fair value of all Byrne’s assets and liabilities were estimated, including tangible and intangible assets. The implied fair value of the goodwill being a residual was then compared to the recorded goodwill to determine the amount of impairment. As a result of this analysis a $1,016,325 goodwill impairment charge was recorded in the Company’s consolidated statement of income for the year ended December 31, 2012.

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 fourteen 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, 2013, 2012 and 2011.

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



	As of December 31,
	2013		2012
Gross Carrying Amount
Customer contracts	$	7,683,845	$	5,757,720
Customer relationships	8,200,132		5,642,815
Non-compete agreements	3,229,520		2,386,124
Technology	2,385,652		2,429,362
Trade names	556,515		561,499
	22,055,664		16,777,520
Accumulated Amortization
Customer contracts	5,349,464		3,814,621
Customer relationships	2,923,485		1,282,035
Non-compete agreements	1,871,587		945,829
Technology	1,298,860		756,566
Trade names	359,087		235,591
	11,802,483		7,034,642
Intangible assets, net	$	10,253,181	$	9,742,878

Amortization expense related to customer contracts is included in cost of revenues in the consolidated statements of income. 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. Amortization expense for the years ended December 31, 2013, 2012 and 2011 is as follows:



	Year Ended December 31,
	2013		2012		2011
Customer contracts	$	1,550,247	$	2,450,178	$	1,364,443
Customer relationships	1,642,892		1,265,106		16,929
Non-compete agreements	967,646		723,626		222,203
Technology	517,151		670,654		85,912
Trade names	124,085		172,606		62,985
Total intangible amortization expense	$	4,802,021	$	5,282,170	$	1,752,472

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



	Estimated Amortization
	Included in Cost of Revenues		Included in Selling, General and Administrative Expenses
2014	$	1,568,124	$	2,576,896
2015	544,315		1,990,205
2016	226,837		1,189,781
2017	38,668		859,411
2018	—		590,485

- 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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