ADT 2011 Annual Report Download - page 218

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Goodwill and Intangible Assets
Fiscal 2011 and 2010 Goodwill
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. Fair value for each reporting unit is determined utilizing a discounted cash flow analysis based
on the Company’s forecast cash flows 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,
including expectations and assumptions regarding the timing and degree of any economic recovery,
anticipated future cash flow, comparable market transactions (to the extent available), other market
data and the Company’s overall market capitalization. There were no goodwill impairments as a result
of performing the Company’s 2011 and 2010 annual impairment tests. Based on the Company’s most
recent annual goodwill impairment assessment performed during the fourth quarter of fiscal 2011, the
Company determined that its Water and Environmental Systems reporting unit within the Tyco Flow
Control segment had limited recoverability of goodwill. The fair value of the reporting unit exceeded its
carrying value by 6.9%. As of September 30, 2011, the Water and Environmental Systems goodwill
balance was $298 million. While historical performance and current expectations have resulted in fair
values of goodwill in excess of carrying values, if our assumptions are not realized, it is possible that in
the future 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
will continue to monitor the recoverability of its goodwill.
During the first quarter of fiscal 2011, the Company realigned its Safety Products segment between
its ADT Worldwide and Fire Protection segments to create two new segments: Tyco Security Solutions
and Tyco Fire Protection. Also, various businesses were realigned between Tyco Security Solutions and
Tyco Fire Protection. As a result of the realignment of business activities, the balances as of
September 25, 2009 have been recast. As part of the realignment the Company tested the related
goodwill balances for recoverability and determined goodwill continued to be recoverable.
2011 Financials 115