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INTERMEDIX HOLDINGS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2010 platforms and to its enterprise cloud computing application services as well as for modifications to existing computer software that result in additional functionality. These costs are included in "Computer software and technology development costs, net" in the accompanying consolidated balance sheet. Costs incurred for the development of internal -use software largely consist of payroll and payroll - related costs for employees and consultants who are directly associated with and who devote time to the internal -use computer software projects. Such costs are expensed until (i) the preliminary project stage is completed, (ii) management has authorized and committed funding for the project, and (iii) it is probable that the project will be completed and the software will be used to perform the function intended, at which time,. in accordance with ASC Topic 350 -40, any additional software development costs are capitalized. Capitalization ceases when a computer software project is substantially complete and ready for its intended use. Amortization of internally developed computer software, which is included in "Depreciation and amortization expense," begins when the computer software is ready for its intended use. These costs are amortized over the period which the asset is expected to contribute directly or indirectly to future cash flow. The Company generally amortizes internally developed software on a straight -line basis over a five year period and periodically reassesses the estimated useful lives of its internally developed software in consideration of, among other factors, the effects of (i) obsolescence, (ii) technology, (iii) competition, and (iv) other economic factors. The Company assesses the recoverability of computer software development costs by comparing the carrying amount to the fair value whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group. An impairment loss is recognized if the carrying amount exceeds the fair value. In determining fair value of internally developed computer software, the Company considers whether (i) it is expected to provide continued substantive service potential, (ii) significant changes in the extent or manner in which the software is used or is expected to be used, (iii) it is or is expected to undergo a significant change, or (iv) projected development or modification costs significantly exceed original estimates. Also included in "Computer Software and Technology Development Costs, net" is software purchased from third parties. (h) Goodwill and Intangible Assets Goodwill is recorded in accordance with ASC Topic 805, when the consideration paid for an acquisition exceeds the fair value of identifiable net tangible and identifiable intangible assets acquired. In accordance with ASC Topic 350, Intangibles — Goodwill and Other (ASC Topic 350) goodwill and other indefinite -lived intangible assets are reviewed for impairment at least annually. The Company has elected to perform its annual impairment testing as of October 31 of each year and as required should any triggering events occur indicating a potential for impairment. Given the close proximity of the fair value measurements performed on the Merger Date in relation to the date of the accompanying consolidated balance sheet, and due to the absence of any triggering events during the Successor period, no impairment testing was deemed necessary for the current year. 10 (Continued)