F-10
Commercial Segment was comprised of
Navigation
and
Other Commercial
reporting units. Our two Government Segment reporting
units, the
Government Solutions Group
(“GSG”) unit and the
Cyber Intelligence
unit, remain the same.
In 2013, we recorded an $8,209 impairment charge for the excess of the carrying value of goodwill over the estimated fair value
of our Platform and Applications reporting unit. In 2012, we recorded an $86,332 impairment charge for the excess of the carrying
value of goodwill over the estimated fair value of our Navigation reporting unit. See Note 9 for additional details. No impairment
charges were recorded in 2011.
Software Development Costs.
Acquired technology, representing the estimated value of the proprietary technology acquired,
has been recorded as capitalized software development costs. We also capitalize software development costs after we establish
technological feasibility, and amortize those costs over the estimated useful lives of the software beginning on the date when the
software is available for general release.
Costs are capitalized when technological feasibility has been established. For new products, technological feasibility is
established when an operative version of the computer software product is completed in the same software language as the product to
be ultimately marketed, performs all the major functions planned for the product, and has successfully completed initial customer
testing. Technological feasibility for enhancements to an existing product is established when a detail program design is completed.
Costs that are capitalized include direct labor and other direct costs. These costs are amortized on a product-by-product basis using the
straight-line method over the product’s estimated useful life, between three and five years. Amortization is also computed using the
ratio that current revenue for the product bears to the total of current and anticipated future revenue for that product (the revenue curve
method). If this revenue curve method results in amortization greater than the amount computed using the straight-line method,
amortization is recorded at that greater amount. Our policies to determine when to capitalize software development costs and how
much to amortize in a given period require us to make subjective estimates and judgments. If our software products do not achieve the
level of market acceptance that we expect and our future revenue estimates for these products change, the amount of amortization that
we record may increase compared to prior periods. The amortization of capitalized software development costs is recorded as a cost of
revenue. Amortization of capitalized software developments costs included in direct costs of services and systems were respectively
$2,527 and 4,939 in 2013, $2,692 and 4,971 in 2012, and $6,901 and $3,870 in 2011. The decrease in capitalized software
development costs included in services is directly related to the 2012 write-down of capitalized software development costs associated
with the Navigation reporting unit.
Acquired technology is amortized over the product’s estimated useful life based on the valuation procedures performed at the
time of the acquisition. Amortization is calculated using the straight-line method or the revenue curve method, whichever is greater.
We also capitalize costs related to software developed or obtained for internal use when management commits to funding the
project and the project completes the preliminary project stage. Capitalization of such costs ceases when the project is substantially
complete and ready for its intended use. Capitalized software developed for internal use is reported as part of property and equipment
on our Consolidated Balance Sheets.
During 2013, we recognized a software development cost impairment charge of $9,270 after determining that costs related to
our Platforms and Applications reporting unit were not recoverable based on decreased expected revenue from products using the
software. During 2012, we recognized a software development cost impairment charge of $12,420 after determining that costs related
our Navigation reporting were not recoverable based on decreased projected revenues and sales pipeline. No impairment charges were
recorded in 2011.
Acquired Intangible Assets.
Our acquired intangible assets have useful lives of four to nineteen years, including assets
acquired in 2009 and 2012. We are amortizing these assets using the straight-line method. We have not incurred costs to renew or
extend the term of acquired intangible assets.
We evaluate acquired intangible assets when events or changes in circumstances indicate that the carrying values of such assets
might not be recoverable. Our review of factors present and the resulting appropriate carrying value of our acquired intangible assets
are subject to judgments and estimates by management. Future events such as a significant underperformance relative to historical or
projected future operating results, significant changes in the manner of our use of the acquired assets, and significant negative industry
or economic trends could cause us to conclude that impairment indicators exist and that our acquired intangible assets might be
impaired. In 2013, after adjusting projections for uncertainty at a significant customer, we recorded an impairment charge of $599 to
acquired intangible assets related to our Platforms and Applications reporting unit. During the second quarter of 2012, after adjusting
projections for the impact of a customer contract renegotiation, we recorded an impairment charge of $13,964 to acquired intangible
assets related to our Navigation reporting unit. No impairment charges were recorded in 2011.
Deferred Compensation Plan.
We have a non-qualified deferred compensation arrangement to fund certain supplemental
executive retirement and deferred income plans. Under the terms of the arrangement, the participants may elect to defer the receipt of
a portion of their compensation and each participant directs the manner in which their investments are deemed invested. The funds are
