Goodwill and Purchased Intangible Assets
|12 Months Ended
Jun. 30, 2016
|Goodwill and Intangible Assets Disclosure [Abstract]
|Goodwill and Purchased Intangible Assets
GOODWILL AND PURCHASED INTANGIBLE ASSETS
The following table presents goodwill balances and the movements during the fiscal years ended June 30, 2016 and 2015:
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in prior business combinations. Goodwill is net of accumulated impairment losses of $277.6 million, which were recorded prior to the fiscal year ended June 30, 2014.
The Company has made certain organizational changes and consolidated its product divisions effective in the first quarter of fiscal year ended 2016, in response to changing customer requirements in the industry. As required by the authoritative guidance, when an entity reorganizes its reporting structure in a manner that changes the composition of one or more of its reporting units, goodwill is reassigned to the affected reporting units using a relative fair value allocation approach. The fair value of each reporting unit is compared to the fair value of the business immediately prior to the reorganization. The fair value for the Company’s reporting units was determined using a weighted combination of market-based and income-based approach. The Company had four reporting units as of June 30, 2016: Wafer Inspection, Patterning, Global Service and Support, and Others. Prior to the organizational changes, the Company had four reporting units: Defect Inspection, Metrology, Service and Other. The goodwill balances by reporting units as of June 30, 2016 were as follows:
The changes in the gross goodwill balance during the fiscal years ended June 30, 2016 and 2015 resulted from foreign currency translation adjustments.
The Company performed a qualitative assessment of the goodwill by reporting unit as of November 30, 2015 and concluded that it was more likely than not that the fair value of each of the reporting units exceeded its carrying amount. In assessing the qualitative factors, the Company considered the impact of key factors including change in industry and competitive environment, market capitalization, stock price, earnings multiples, budgeted-to-actual revenue performance from prior year, gross margin and cash flow from operating activities. As such, it was not necessary to perform the two-step quantitative goodwill impairment test at that time. In addition, there have been no significant events or circumstances affecting the valuation of goodwill subsequent to the qualitative assessment performed in the second quarter of the fiscal year ended June 30, 2016. The next annual assessment of goodwill by reporting unit is scheduled to be performed in the second quarter of the fiscal year ending June 30, 2017.
Purchased Intangible Assets
The components of purchased intangible assets as of the dates indicated below were as follows:
Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.
For the fiscal years ended June 30, 2016, 2015 and 2014, amortization expense for other intangible assets was $7.6 million, $15.8 million and $16.2 million, respectively. Based on the intangible assets recorded as of June 30, 2016, and assuming no subsequent additions to, or impairment of, the underlying assets, the remaining estimated annual amortization expense is expected to be as follows: