|ENVISION HEALTHCARE CORP filed this Form 10-Q on 11/03/2017|
Critical Accounting Policies
A summary of significant accounting policies is disclosed in our 2016 Annual Report on Form 10-K under the caption “Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. There have been no material changes in the nature of our critical accounting policies or the application of those policies other than those below since December 31, 2016.
Due to the Merger, and as a result of purchase accounting, the book value of the indefinite-lived intangibles acquired from the legacy EHH physician services reporting unit was recorded at fair value as of the acquisition date and subsequently was combined within our existing physician services reporting unit. As a result, the excess of fair value over carrying value of the indefinite-lived intangibles as of December 31, 2016 was not significant. During the three months ended September 30, 2017, we experienced lower than expected operating results in our physician services reporting unit combined with an observed decline in market capitalization, which prompted us to evaluate whether circumstances had changed that would more likely than not reduce the fair value of the physician services reporting unit below its carrying amount. While conducting this evaluation, we considered macroeconomic and industry conditions, overall financial performance of the reporting unit and the decline in the share price, among other factors, all of which require considerable judgment. After considering the totality of the events and circumstances, we concluded that an interim impairment test was not required. We will perform our annual goodwill impairment test during the fourth quarter of 2017 and there can be no assurance that the estimates and assumptions made for purposes of this qualitative evaluation will prove to be an accurate prediction of future results. Factors that could impact the final determination of fair value in connection with the completion of the annual goodwill impairment process include a sustained decline in market capitalization, changes in the estimated fair values of the physician services assets and liabilities, changes in projected future earnings and net cash flows, changes in market related multiples, and changes in valuation related assumptions such as discount rates and perpetual growth rates.
Recent Accounting Pronouncements
See Note 1 in the Notes to the Unaudited Consolidated Financial Statements.