Loss contingencies and commitment
We record an estimated loss contingency when information is available that indicates that it is probable that a material loss has been incurred or an asset has been impaired and the amount of the loss can be reasonably estimated. We disclose if the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, or if an exposure to loss exists in excess of the amount accrued. Loss contingencies considered remote are generally not disclosed unless they arise from guarantees, in which case the guarantees would be disclosed. Determining the likelihood of incurring a liability and estimating the amount of the liability involves an exercise of judgment. If the litigation results in an outcome that has greater adverse consequences to us than management currently expects, then we may have to record additional charges in the future. As of
June 30, 2013, there was no probable material losses incurred that could be reasonably estimated. Our commitments consist of obligations under operating leases for corporate office space, co-location facilities for data center capacity for research and test data centers, software contracts used in our production environment and capital leases.
Goodwill, long-lived assets and other intangible assets
We classify our intangible assets into three categories: intangible assets with definite lives subject to amortization; intangible assets with indefinite lives not subject to amortization; and goodwill. Periodically, we evaluate our fixed assets and intangible assets with definite lives for impairment. If the carrying amount of an asset or asset group (in use or under development) is evaluated and found not to be recoverable (carrying amount exceeds the gross, undiscounted cash flows from use and disposition), then an impairment loss must be recognized. The impairment loss is measured as the excess of the carrying amount over the asset's or asset group's fair value. In addition, the potential impairment of finite life intangibles is assessed whenever events or a change in circumstances indicate the carrying value may not be recoverable. We conduct a test for the impairment of goodwill on at least an annual basis. We have one reporting unit,
Lyris, Inc.We adopted June 30thas the date of the annual impairment test, but will conduct the test at an earlier date if indicators of possible impairment arise that would cause a triggering event. Due to the triggering event of the decline of our stock price from $4.20in the first quarter of fiscal 2012 to $1.20in the second quarter of fiscal 2012, we assessed the qualitative factors to determine whether it is necessary to perform the current two step test for goodwill impairment during each quarter ended for fiscal year 2013 and 2012. During the first quarter of fiscal 2012, an overall market decline affected all companies across all industries, thus the decline in our stock price from $4.20to $1.50was considered temporary due to expectations for recovery in the market. However, in the second quarter of fiscal 2012, our assessment of relevant events and circumstances conducted on December 31, 2011, considered the stock price having remained flat at $1.20as of December 31, 2011in spite of an additional purchase of 19 million shares, having no positive market effect on stock price, we determined that it was more-likely-than-not that the fair value was less than the carrying amount. As a result, the two-step impairment test related to goodwill was performed during the second quarter of fiscal 2012.