Note 6 - Goodwill and Other Intangible Assets |
9 Months Ended | ||
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Mar. 31, 2020 | |||
Notes to Financial Statements | |||
Goodwill and Intangible Assets Disclosure [Text Block] |
Our goodwill and intangible assets are comprised of goodwill, which represents the excess of cost over the fair value of net assets acquired, and our Ethan Allen trade name and related trademarks. Both goodwill and indefinite-lived intangible assets are not amortized as they are estimated to have an indefinite life.We are required to test goodwill and indefinite-lived intangibles at the reporting level for potential impairment annually, or more frequently if impairment indicators occur. Goodwill and other indefinite-lived intangible assets are evaluated for impairment on an annual basis during the fourth quarter of each fiscal year, and between annual tests whenever events or circumstances indicate that the carrying value of the goodwill or other intangible asset may exceed its fair value.In the fiscal third quarter ended March 31, 2020, wholesale net sales declined 14.1% and there was a meaningful decline (46.4% ) in our stock price from the fiscal second quarter to the third quarter (from $19.06 to $10.22 ). This decline coupled with the significant adverse changes in the business climate from the COVID-19 health crisis, led us to determine that an impairment triggering event occurred, which required an interim quantitative impairment assessment of goodwill and intangible assets. Based on the Company’s interim quantitative assessment performed as of March 31, 2020, the fair value of the wholesale reporting unit exceeded its related carrying value by approximately 25%, thus no impairment of goodwill as of March 31, 2020.
The fair value of our trade name, which is the Company’s only indefinite-lived intangible asset other than goodwill, was also reviewed as of March 31, 2020 for impairment. We performed the interim trade name impairment test and concluded that its fair value substantially exceeded the carrying value as of March 31, 2020, thus no impairment.As of
March
31, 2020, the goodwill balance was $25.4 million, while other indefinite-lived intangible assets totaled $19.7 million. If the market valuation of our common shares or operating results within the wholesale reporting unit significantly decline beyond current levels, we may again need to conduct an evaluation of the fair value of our goodwill and trade name, which may result in an impairment charge. |