| Description of Business and Summary of Significant Accounting Policies | Description of Business and Summary of Significant Accounting Policies Description of Business— Ebix, Inc., and its subsidiaries, (“Ebix” or the “Company”) is a leading international supplier of on-demand infrastructure Exchanges to the insurance, financial e-learning, and healthcare industries. In the insurance sector, the Company’s main focus is to develop and deploy a wide variety of insurance and reinsurance exchanges on an on-demand basis, while also providing Software-as-a-Service ("SaaS") enterprise solutions in the area of customer relationship management, front-end & back-end systems, outsourced administrative and risk compliance. The Company's products feature fully customizable and scalable on-demand software designed to streamline the way insurance professionals manage distribution, marketing, sales, customer service, and accounting activities. With a "Phygital” strategy that combines physical distribution outlets in many Association of Southeast Asian Nations (“ASEAN”) countries to an Omni-channel online digital platform, the Company’s EbixCash Financial exchange portfolio encompasses leadership in areas of domestic & international money remittance, foreign exchange, travel, pre-paid & gift cards, utility payments, etc., in emerging countries such as India. EbixCash through its travel portal Via.com is also one of Southeast Asia’s leading travel exchanges with distribution outlets and corporate clients processing millions of transactions every year. EbixCash, also, is a provider of lending software solutions to financial institutions and on-demand software on wealth and asset management to banks, asset managers and wealth management firms. The Company’s E-learning solutions are provided to schools across the breadth of India with the goal of educating students in a classroom through high quality 2-D and 3-D animation and multimedia learning. The Company has its headquarters in Johns Creek, Georgia and also conducts operating activities in Australia, Canada, India, New Zealand, Singapore, United Kingdom, Brazil, Philippines, Indonesia, and United Arab Emirates. International revenue accounted for 59.4% and 39.2% of the Company’s total revenue for the nine months ended September 30, 2018 and 2017 , respectively. The Company’s revenues are derived from four product/service channels. Presented in the table below is the breakout of our revenue streams for each of those product/service channels for the three months ended September 30, 2018 and 2017 . Three Months Ended Nine Months Ended September 30, September 30, (In thousands) 2018 2017 2018 2017 Exchanges $ 106,853 $ 64,130 $ 290,292 $ 177,117 Broker Systems 3,414 3,715 10,720 11,098 Risk Compliance Solutions (“RCS”) 18,066 24,265 59,340 68,780 Carrier Systems 310 690 1,147 2,295 Totals $ 128,643 $ 92,800 $ 361,499 $ 259,290 The Company is continuing to evaluate the classification of the 2017 and 2018 acquisitions that collectively make up the EbixCash Financial Exchanges, refer to Part I, Item I Business in our Form 10-K for the year ended December 31, 2017. Currently these acquisitions are reported under the Exchange channel, but this classification is subject to change based on the conclusions of our continued evaluations. Summary of Significant Accounting Policies Basis of Presentation— The accompanying unaudited condensed consolidated financial statements and these notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") with the effect of inter-company balances and transactions eliminated. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP and SEC rules have been condensed or omitted as permitted by and pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. These unaudited condensed consolidated financial statements contain adjustments (consisting only of normal recurring items) necessary to fairly present the consolidated financial position of the Company and its consolidated results of operations and cash flows. Operating results for the nine months ended September 30, 2018 and 2017 are not necessarily indicative of the results that may be expected for future quarters or the full year of 2018. The condensed consolidated December 31, 2017 balance sheet included in this interim period filing has been derived from the audited financial statements at that date, but does not necessarily include all of the information and related notes required by GAAP for complete financial statements. These condensed interim financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 . Restricted Cash- As part of the Wdev Solucoes em Technologia SA ("Wdev") acquisition, upfront cash consideration is being held in an escrow account for the thirty-eight month period following the effective date of the acquisition to ensure that the acquired business achieves the minimum specified annual net revenue threshold, which if not achieved will result in said funds being returned to Ebix. As of September 30, 2018 there is $2.5 million included in other long-term assets of the Company's Condensed Consolidated Balance Sheet. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows: Nine Months Ended September 30, (In thousands) 2018 2017 Cash and cash equivalents $ 134,987 $ 96,734 Restricted cash — 11,219 Restricted cash included in other long-term assets 2,523 3,050 Total cash, cash equivalents, and restricted cash shown in the statement of cash flows $ 137,510 $ 111,003 Advertising —Advertising costs amounted to $6.2 million and $4.4 million in the first nine months of 2018 and 2017 , respectively, and are included in sales and marketing expenses in the accompanying Condensed Consolidated Statements of Income. Under legacy US GAAP 340-20, direct response advertising was eligible for capitalization if certain conditions were met. During the first nine months of 2017 reported sales and marketing expenses included $3.0 million of amortization of certain direct-response advertising costs associated with our medical education services, which have been capitalized in accordance with Accounting Standards Codification ("ASC") Topic 340. These costs were previously amortized to advertising expense over periods ranging from twelve to twenty-four months based on the type of product the customer purchased. Effective January 1, 2018 Subtopic 340-40 replaced that guidance to require the costs of direct-response advertising to be expensed as they are incurred or the first time the advertising takes place. The Company was required to recognize a cumulative effective change to opening retained earnings in the year of adoption of the standard. The Company recorded a one-time $1.9 million adjustment to retained earnings on January 1, 2018 and is expensing all future costs from this date forward. Under the new guidance Subtopic 340-40, the Company's expense decreased by $625 thousand during the first nine months of 2018 from what would have been recorded under legacy US GAAP 340-20. Fair Value of Financial Instruments— The Company follows the relevant GAAP guidance concerning fair value measurements which provides a consistent framework to define, measure, and disclose the fair value of assets and liabilities in financial statements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction. This guidance establishes a three-level hierarchy priority for disclosure of assets and liabilities recorded at fair value. The ordering of priority reflects the degree to which objective data from external active markets are available to measure fair value. The classification of assets and liabilities within the hierarchy is based on whether the inputs to the valuation methodology used for measurement are observable or unobservable. The classifications are as follows: • Level 1 Inputs - Unadjusted quoted prices available in active markets for identical investments to the reporting entity at the measurement date. • Level 2 Inputs - Other than quoted prices included in Level 1 inputs, which are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. • Level 3 Inputs - Unobservable inputs, which are used to the extent that observable inputs are not available, and used in situations where there is little or no market activity for the asset or liability and wherein the reporting entity makes estimates and assumptions related to the pricing of the asset or liability including assumptions regarding risk. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. As of September 30, 2018 , the Company had the following financial instruments to which it had to consider fair values and had to make fair value assessments: • Short-term investments (commercial bank certificates of deposits and mutual funds), for which the fair values are measured as a Level 1 instrument. • Contingent accrued earn-out business acquisition consideration liabilities for which fair values are measured as Level 3 instruments. These contingent consideration liabilities were recorded at fair value on the acquisition date and are re-measured quarterly based on the then assessed fair value and adjusted if necessary. The increases or decreases in the fair value of contingent consideration payable can result from changes in anticipated revenue levels and changes in assumed discount periods and rates. As the fair value measure is based on significant inputs that are not observable in the market, they are categorized as Level 3. Other financial instruments not measured at fair value on the Company's unaudited condensed consolidated balance sheet at September 30, 2018 but which require disclosure of their fair values include: cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, accrued payroll and related benefits, capital lease obligations, and the revolving line of credit and term loan debt under the syndicated credit agreement facility with Regions Financial Corporation. The Company believes that the estimated fair value of such instruments at September 30, 2018 and December 31, 2017 approximates their carrying value as reported on the unaudited Condensed Consolidated Balance Sheet. Additional information regarding the Company's assets and liabilities that are measured at fair value on a recurring basis is presented in the following tables: Fair Values at Reporting Date Using* Descriptions Balance, September 30, 2018 Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) Assets Commercial bank certificates of deposits ($2.86 million is recorded in the long term asset section of the consolidated balance sheets in "Other Assets") $ 23,342 $ 23,342 $ — $ — Mutual Funds (recorded in the long term asset section of the consolidated balance sheets in "Other Assets") 9,668 9,668 — — Total assets measured at fair value $ 33,010 $ 33,010 $ — $ — Liabilities Derivatives: Contingent accrued earn-out acquisition consideration (a) $ 29,285 $ — $ — $ 29,285 Total liabilities measured at fair value $ 29,285 $ — $ — $ 29,285 (a) The income valuation approach is applied and the valuation inputs include the contingent payment arrangement terms, projected cash flows, rate of return, and probability assessments. * During the three and nine months ended September 30, 2018 there were no transfers between fair value Levels 1, 2 or 3. Fair Values at Reporting Date Using* Descriptions Balance, December 31, 2017 Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) Assets Commercial bank certificates of deposits ($2.19 million is recorded in the long term asset section of the consolidated balance sheets in "Other Assets") $ 22,293 22,293 $ — $ — Mutual Funds ($785 thousand recorded in the long term asset section of the consolidated balance sheets in "Other Assets") 6,278 6,278 — — Total assets measured at fair value $ 28,571 $ 28,571 $ — $ — Liabilities Derivatives: Contingent accrued earn-out acquisition consideration (a) $ 37,096 $ — $ — $ 37,096 Total liabilities measured at fair value $ 37,096 $ — $ — $ 37,096 (a) The income valuation approach is applied and the valuation inputs include the contingent payment arrangement terms, projected cash flows, rate of return, and probability assessments. * During the twelve months ended December 31, 2017 there were no transfers between fair value Levels 1, 2 or 3. For the Company's assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3), the following table provides a reconciliation of the beginning and ending balances for each category therein, and gains or losses recognized during the nine months ended September 30, 2018 and during the year ended December 31, 2017 : Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Contingent Liability for Accrued Earn-out Acquisition Consideration September 30, 2018 December 31, 2017 (In thousands) Beginning balance $ 37,096 $ 8,510 Total remeasurement adjustments: Gains included in earnings ** (645 ) (164 ) Reductions recorded against goodwill (13,718 ) (4,007 ) Foreign currency translation adjustments *** (2,843 ) 522 Acquisitions and settlements Business acquisitions 13,226 34,156 Settlement payments (3,831 ) (1,921 ) Ending balance $ 29,285 $ 37,096 The amount of total (gains) losses for the period included in earnings or changes to net assets, attributable to changes in unrealized gains relating to assets or liabilities still held at period-end. $ (645 ) $ — ** recorded as a reduction to reported general and administrative expenses *** recorded as a component of other comprehensive income within stockholders' equity Quantitative Information about Level 3 Fair Value Measurements The significant unobservable inputs used in the fair value measurement of the Company's contingent consideration liabilities designated as Level 3 are as follows: (In thousands) Fair Value at September 30, 2018 Valuation Technique Significant Unobservable Input Contingent acquisition consideration: (Wdev, ItzCash, Indus, and Miles acquisition) $29,285 Discounted cash flow Projected revenue and probability of achievement (In thousands) Fair Value at December 31, 2017 Valuation Technique Significant Unobservable Input Contingent acquisition consideration: (Wdev and ItzCash acquisition) $37,096 Discounted cash flow Projected revenue and probability of achievement Sensitivity to Changes in Significant Unobservable Inputs As presented in the table above, the significant unobservable inputs used in the fair value measurement of contingent consideration related to business acquisitions are projected revenue forecasts as developed by the relevant members of Company's management team and the probability of achievement of those revenue forecasts. Significant increases (decreases) in these unobservable inputs in isolation would result in a significantly higher (lower) fair value measurement. The Company applies these terms in its calculation and determination of the fair value of contingent earn out liabilities for purchased businesses as part of the related valuation and purchase price allocation exercise for the corresponding acquired assets and liabilities. During 2017 and 2018, certain of the Company's contingent earn out liabilities were adjusted because of changes to anticipated future revenues from these acquired businesses, or as a result of finalizing purchase price allocations that were previously provisional. Revenue Recognition— In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers ("Topic 606") . Topic 606 outlines a single comprehensive model for companies to use in accounting for revenue arising from contracts with customers, and supersedes most current revenue recognition guidance, including industry-specific guidance. In March 2016, the FASB issued ASU 2016-08, Principal Versus Agent Considerations (Reporting Revenue Gross Versus Net), which amends the principal-versus-agent implementation guidance and in April 2016 the FASB issued ASU 2016-10, Identifying Performance Obligations and Licensing, which amends the guidance in those areas in the new revenue recognition standard. The Company derives its revenues primarily from subscription and transaction fees pertaining to services delivered over our exchanges or from our application service provider ("ASP") platforms, fees for risk compliance solution services, and fees for software development projects including associated fees for consulting, implementation, training, and project management provided to customers with installed systems and applications. Sales and value-added taxes are not included in revenues, but rather are recorded as a liability until the taxes assessed are remitted to the respective taxing authorities. Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We determine revenue recognition through the following steps: • identification of the contract, or contracts, with a customer; • identification of the performance obligations in the contract; • determination of the transaction price; • allocation of the transaction price to the performance obligations in the contract; and • recognition of revenue when, or as, we satisfy a performance obligation. For contracts that contain multiple deliverables, we analyze the revenue arrangements in accordance with the relevant technical accounting guidance, which provides criteria governing how to determine whether goods or services that are delivered separately in a bundled sales arrangement should be considered as separate performance obligations for the purpose of revenue recognition. These types of arrangements include obligations pertaining to software licenses, system set-up, and professional services associated with product customization or modification. Delivery of the various contractual obligations typically occurs over periods of less than eighteen months. These arrangements generally do not have refund provisions or have very limited refund terms. Software development arrangements involving significant customization, modification or production are accounted for in accordance with the appropriate technical accounting guidance issued by FASB using the percentage-of-completion method. The Company recognizes revenue using periodic reported actual hours worked as a percentage of total expected hours required to complete the project arrangement and applies the percentage to the total arrangement fee. Financial exchange revenue consists largely of transaction-based fees and fees from the corporate and retail segments. The transaction-based fees are primarily based on a percentage of payment value processed for solutions such as retail and corporate payments, international and domestic money transfers, foreign exchange, travel related transactions and general purpose reloadable cards. Transaction-based fees are recognized at the completion of the transaction. The Company adopted Topic 606 as of January 1, 2018 using the modified retrospective method and applying the new standard to those contracts which were not completed as of January 1, 2018. Therefore, the comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. The adoption resulted in a decrease to retaine d earnings of $11.6 million for the cumulative e ffect of applying the Topic 606. This decrease was principally driven by the deferral of certain services revenues associated with programming, setup, and implementation activities related to our SaaS offering and changes related to costs to obtain customers, including the related amortization period. Impact of New Revenue Recognition Standard on Financial Statement Line Items The cumulative effect of applying Topic 606 to all contracts was recorded as an adjustment to retained earnings as of the adoption date. As a result of applying the modified retrospective method to adopt the new revenue guidance, the following adjustments were made to accounts on the condensed consolidated balance sheet as of January 1, 2018: Impact of Change in Accounting Policy (In thousands) As Reported December 31, 2017 Adjustments Adjusted January 1, 2018 Other Current Assets $ 33,532 $ 898 $ 34,430 Current Assets 252,932 898 253,830 Deferred tax asset, net 43,529 2,843 46,372 Other Assets 11,720 1,502 13,222 Total Assets 1,113,013 5,243 1,118,256 Current Deferred Revenue 22,562 5,124 27,686 Current Liabilities 146,932 5,124 152,056 Long Term Deferred Revenue 1,423 8,921 10,344 Total Liabilities 579,254 14,045 593,299 Retained Earnings 510,975 (8,802 ) 502,173 The following tables present the impact of adopting Topic 606 on the Company’s unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2018 : Impact of Change in Accounting Policy As Reported Three Months Ended September 30, 2018 Adjustments Balances without adoption of Topic 606 Condensed Consolidated Statement of Income (In thousands) Operating Revenue $ 128,643 $ 32 $ 128,675 Costs of Services Provided 42,963 (2 ) 42,961 Total Operating Expenses 89,405 (2 ) 89,403 Operating Income 39,238 34 39,272 Income before income taxes 30,960 34 30,994 Income tax (expense) benefit (1,679 ) (8 ) (1,687 ) Net income including non-controlling interest 29,281 26 29,307 Net income attributable to Ebix, Inc. 29,242 26 29,268 Basic earnings per common share attributable to Ebix, Inc. 0.93 — 0.93 Diluted Earnings per common share attributable to Ebix, Inc. 0.92 — 0.92 As Reported Nine Months Ended September 30, 2018 Adjustments Balances without adoption of Topic 606 Condensed Consolidated Statement of Income (In thousands) Operating Revenue $ 361,499 $ (592 ) $ 360,907 Costs of Services Provided 126,113 (122 ) 125,991 Total Operating Expenses 250,050 (122 ) 249,928 Operating Income 111,449 (470 ) 110,979 Income before income taxes 90,835 (470 ) 90,365 Income tax (expense) benefit (6,027 ) 115 (5,912 ) Net income including non-controlling interest 84,808 (355 ) 84,453 Net income attributable to Ebix, Inc. 84,630 (355 ) 84,275 Basic earnings per common share attributable to Ebix, Inc. 2.69 (0.01 ) 2.68 Diluted Earnings per common share attributable to Ebix, Inc. 2.67 (0.01 ) 2.66 As Reported September 30, 2018 Adjustments Balances without adoption of Topic 606 Condensed Consolidated Balance Sheet (In thousands) Other current assets $ 32,799 $ (843 ) $ 31,956 Total current assets 348,692 (843 ) 347,849 Deferred tax asset, net 44,656 (2,056 ) 42,600 Other assets 30,546 (1,273 ) 29,273 Total assets 1,428,895 (4,172 ) 1,424,723 Current Deferred Revenue 30,174 (4,618 ) 25,556 Total current liabilities 222,912 (4,618 ) 218,294 Long Term Deferred Revenue 8,153 (6,866 ) 1,287 Total liabilities 887,305 (11,484 ) 875,821 Retained earnings 577,353 7,312 584,665 As Reported Nine Months Ended September 30, 2018 Adjustments Balances without adoption of Topic 606 Condensed Consolidated Statement of Cash Flows (In thousands) Net income attributable to Ebix, Inc. $ 84,630 $ (355 ) $ 84,275 Other assets (655 ) (122 ) (777 ) Deferred Revenue (10,772 ) 2,561 (8,211 ) Net cash provided by operating activities 74,165 2,084 76,249 Disaggregation of Revenue The following tables present revenue disaggregated by primary geographical regions and product channels for the three months and nine months ended September 30, 2018 : Three Months Ended September 30, Nine Months Ended September 30, (In thousands) (In thousands) Revenue: 2018 2017 (1) 2018 2017 (1) United States 48,395 52,603 $ 146,697 $ 157,682 Canada 1,267 1,827 4,323 5,969 Latin America 4,586 6,268 15,141 14,486 Australia 8,576 8,575 26,803 25,091 Singapore* 1,731 1,368 5,871 4,493 New Zealand 454 462 1,467 1,485 India* 56,631 17,509 139,985 37,508 Europe 3,854 4,188 11,726 12,576 United Arab Emirates* 319 — 694 — Indonesia* 1,683 — 5,052 — Philippines* 1,147 — 3,740 — $ 128,643 $ 92,800 $ 361,499 $ 259,290 *India led businesses, except for portion of Singapore which is not part of EbixCash. Total revenue in the third quarter of 2018 was $60.3 million. See Note 7 for additional geographic information Three Months Ended Nine Months Ended September 30 September 30 (In thousands) 2018 2017 (1) 2018 2017 Exchanges $ 106,853 $ 64,130 $ 290,292 $ 177,117 Broker Systems 3,414 3,715 10,720 11,098 RCS 18,066 24,265 59,340 68,780 Carrier Systems 310 690 1,147 2,295 Totals $ 128,643 $ 92,800 $ 361,499 $ 259,290 (1) Prior period amounts have not been adjusted under the modified retrospective method. Costs to Obtain and Fulfill a Contract The Company capitalizes certain costs in order to maintain the ability to obtain and fulfill new contracts and contract renewals. These costs are primarily related to the setup and customization of our SaaS based platforms and such costs are amortized over the benefit period. Under our treatment prior to implementing Topic 606, these costs were expensed as incurred. As of September 30, 2018 , the Company had $844 thousand of contract costs in “Other current assets” and $1.3 million in “Other Assets” on the Company's Condensed Consolidated Balance Sheets. (In thousands) September 30, 2018 Balance, beginning of period $ — Topic 606 adjustment 2,401 Adjusted beginning balance $ 2,401 Costs recognized from adjusted beginning balance (686 ) Additions, net of costs recognized 402 Balance, end of period $ 2,117 Deferred Revenue The Company records deferred revenue when it receives payments or invoices in advance of the performance of services. A significant portion of this balance relates to contracts where the customer has paid in advance for the use of our SaaS platforms over a specified period of time. This portion is recognized as the related performance obligation is fulfilled (generally less than one year). The remaining portion of the deferred revenue balance consists primarily of customer-specific customizations that are not distinct from related performance obligations that transfer over time. This portion is recognized over the expected useful life of the customizations. (In thousands) September 30, 2018 Balance, beginning of period $ 23,985 Topic 606 adjustment 14,045 Adjusted beginning balance $ 38,030 Revenue recognized from adjusted beginning balance (26,902 ) Additions from business acquisitions 12,223 Additions, net of revenue recognized and currency translation 14,976 Balance, end of period $ 38,327 Practical Expedients and Exemptions We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed, and (iii) contracts from periods prior to the application of Topic 606. Income Taxes The adoption of Topic 606 resulted in an increase to deferred revenue, which in turn generated an additional deferred tax asset that increased the Company’s net deferred tax asset position. Accounts Receivable and the Allowance for Doubtful Accounts— Reported accounts receivable include $111.0 million of trade receivables stated at invoice billed amounts and $42.2 million of unbilled receivables (net of the estimated allowance for doubtful accounts receivable in the amount of $6.4 million ). The unbilled receivables pertain to certain projects for which the timing of billing is tied to contractual milestones. The Company adheres to such contractually stated performance milestones and accordingly issues invoices to customers as per contract billing schedules. Approximately $5.3 million of deferred revenue is included in billed accounts receivable at September 30, 2018 . The Company recognized and recorded bad debt expense in the amount of $524 thousand and $2.6 million for the three and nine-month periods ended September 30, 2018 and $385 thousand and $1.1 million for the three and nine-month periods ended September 30, 2017 , respectively. Accounts receivable are written off against the allowance account when the Company has exhausted all reasonable collection efforts. During the nine months ended September 30, 2018 and 2017, $332 thousand and $513 thousand , respectively, of accounts receivable, which had been specifically reserved for in prior periods, were written off. Goodwill and Other Indefinite-Lived Intangible Assets— Goodwill represents the cost in excess of the fair value of the net assets of acquired businesses. Indefinite-lived intangible assets represent the fair value of certain acquired contractual customer relationships for which future cash flows are expected to continue indefinitely. In accordance with the relevant FASB accounting guidance, goodwill and indefinite-lived intangible assets are not amortized but are tested for impairment at the reporting unit level on an annual basis or on an interim basis if an event occurs or circumstances change that would likely have reduced the fair value of a reporting unit below its carrying value. Potential impairment indicators include a significant change in the business climate, legal factors, operating performance indicators, competition, and the sale or disposition of a significant portion of the business. The impairment evaluation process involves an assessment of certain qualitative factors to determine whether the existence of events or circumstances would indicate that it is more likely than not that the fair value of any of our reporting units was less than its carrying amount. If after assessing the totality of events or circumstances, we were to determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company would not perform the two-step quantitative impairment testing described further below. The aforementioned two-step quantitative testing process involves comparing the reporting unit carrying values to their respective fair values; we determine fair value of our reporting units by applying the discounted cash flow method using the present value of future estimated net cash flows. If the fair value of a reporting unit exceeds its carrying value, then no further testing is required. However, if a reporting unit's fair value were to be less than its carrying value, we would then determine the amount of the impairment charge, if any, which would be the amount that the carrying value of the reporting unit's goodwill exceeded its implied value. Projections of cash flows are based on our views of growth rates, operating costs, anticipated future economic conditions and the appropriate discount rates relative to risk and estimates of residual values. We believe that our estimates are consistent with assumptions that marketplace participants would use in their estimates of fair value. The use of different estimates or assumptions for our projected discounted cash flows (e.g., growth rates, future economic conditions, discount rates and estimates of terminal values) when determining the fair value of our reporting units could result in different values and may result in a goodwill impairment charge. In 2017 the goodwill residing in the Exchange reporting unit, the RCS reporting unit, and the Carrier reporting unit were evaluated for impairment using step-one of the quantitative testing process described above. The fair value of all three of these reporting units were found to be greater than their carrying value and,therefore, step-two of the |
