ADT 2009 Annual Report Download - page 210

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Goodwill and Intangible Assets (Continued)
of goodwill for each of the aforementioned reporting units. During fiscal 2009, the Company recorded
an aggregate non-cash impairment charge of $2.6 billion ($2.6 billion after-tax). The non-cash
impairment charge was recorded in goodwill and intangible asset impairments in the Company’s
Consolidated Statements of Operations during fiscal 2009. Specifically, the Company recorded the
following non-cash goodwill impairment charges to goodwill at the following reporting units ($ in
millions):
Pre-tax After-tax
Reporting Unit Charge Charge
EMEA Fire ........................................ $ 180 $ 179
EMEA Security ..................................... 613 610
Electrical and Metal Products ........................... 935 915
ACVS ............................................ 327 321
Life Safety ......................................... 240 236
SRS.............................................. 346 340
Total ............................................. $2,641 $2,601
Annually, in the fiscal fourth quarter, and more frequently if triggering events occur, the Company
tests goodwill for impairment by comparing the fair value of each reporting unit with its carrying
amount. See Note 1. Fair value for each reporting unit is determined utilizing a discounted cash flow
analysis based on the Company’s forecasted cash flows and revenue and operating income growth rates,
discounted using an estimated weighted-average cost of capital of market participants. A market
approach is utilized to corroborate the discounted cash flow analysis performed at each reporting unit.
If the carrying amount of a reporting unit exceeds its fair value, goodwill is considered potentially
impaired. In determining fair value, management relies on and considers a number of factors, including
operating results, business plans, economic projections, cash flow forecasts, market data and the
Company’s overall market capitalization. Fair value determinations are sensitive to changes in the
factors described above as well as to inherent uncertainties in applying them to the analysis of goodwill
recoverability.
As described above, the Company considers market capitalization as one of a number of factors in
its evaluation of recoverability of goodwill. The Company considered and evaluated its market
capitalization as well as the other factors described above and concluded that its remaining goodwill
balance of $8.8 billion as of September 25, 2009 is recoverable. As part of the Company’s ongoing
monitoring efforts, the Company will continue to consider the uncertainty of the current global
economic environment and volatility in the stock market as well as in the Company’s own stock price in
assessing goodwill recoverability. Given the current economic environment and the uncertainties
regarding the potential impact on the Company’s business, there can be no assurance that the
Company’s estimates and assumptions regarding forecasted cash flow and revenue and operating
income growth rates of certain reporting units as well as the duration of the ongoing economic
downturn, or the period or strength of recovery, made for purposes of the annual goodwill impairment
test, will prove to be accurate predictions of the future. If the Company’s assumptions are not achieved,
it is possible that an impairment charge may need to be recorded. However, it is not possible at this
time to determine if an impairment charge would result or if such a charge would be material. The
Company has certain reporting units within the Company’s ADT Worldwide and Safety Products
118 2009 Financials