ADT 2007 Annual Report Download - page 214

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Investments (Continued)
respectively. These investments consist primarily of debt securities and are included in prepaid expenses
and other current assets and other assets within the Consolidated Balance Sheets. As of September 28,
2007, $117 million of these debt securities were due to mature within one year, with the remainder
substantially due in one to five years. The unrealized gains and losses related to these investments are
immaterial and have been included as a separate component of shareholders’ equity.
11. Goodwill and Intangible Assets
In connection with the Separation, during the third quarter of 2007 Tyco reorganized into a new
management and segment reporting structure. As part of these organizational changes, the Company
assessed new reporting units and conducted valuations to determine the assignment of goodwill to the
new reporting units based on their estimated relative fair values. Following the relative fair value
goodwill allocation, the Company then tested goodwill for impairment by comparing the fair value of
each reporting unit with its carrying value amount. If the carrying amount of a reporting unit exceeded
its fair value, goodwill was considered potentially impaired. Where goodwill was potentially impaired,
the Company compared the implied fair value of the reporting unit goodwill to the carrying amount of
that goodwill. The carrying amount of goodwill exceeded the implied fair value of goodwill in the
Australia and New Zealand Security Services business, part of the ADT Worldwide segment. As a
result, the Company recognized a goodwill impairment of $46 million in the third quarter of 2007.
In determining fair value, management relies on a number of factors including operating results,
business plans, economic projections, anticipated future cash flows, and market place data. There are
inherent uncertainties related to these factors and judgments in applying them to the analysis of
goodwill impairment. Changes to these factors and judgments could result in impairment to one or
more of our reporting units in a future period. See Note 1.
There were no goodwill impairments related to continuing operations during 2006 and 2005.
The changes in the carrying amount of goodwill for 2007 and 2006 are as follows ($ in millions):
Total
Balance at September 30, 2005 ................................ $11,161
Purchase accounting adjustments ............................... (60)
Acquisitions .............................................. 9
Divestitures .............................................. (7)
Currency translation ........................................ 190
Balance at September 29, 2006 ................................ 11,293
Purchase accounting adjustments ............................... 5
Acquisitions .............................................. 16
Divestitures .............................................. (5)
Impairments .............................................. (46)
Currency translation ........................................ 428
Balance at September 28, 2007 ................................ $11,691
122 2007 Financials