Avid 2011 Annual Report Download - page 71

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• Goodwill: The Company estimates the fair value of goodwill using a weighted combination of market and income
approaches. Since the Company has one reporting unit, it believes that the direct market capitalization approach, which
considers the Company's market capitalization including an implied control premium, is the most relevant measure and is
weighted most heavily. The Company also uses other market approaches including the guideline public company market
approach, under which the Company identifies similar public companies and derives estimated market multiples of
revenue and earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and applies those multiples to
the Company's historical and forecasted results to estimate the fair value of its single reporting unit, and the guideline
transaction market approach, under which the Company identifies recent sale transactions involving similar companies
and derives estimated transaction multiples of revenue and EBITDA and applies those multiples to the Company's
historical and forecasted results to estimate the fair value of its single reporting unit. The income approaches,
specifically discounted cash flow methodologies, include assumptions for, among others, forecasted revenues, gross
profit margins, operating profit margins, working capital cash flows, capital expenditures, growth rates, income tax rates,
expected tax benefits, terminal values and long term discount rates, all of which require significant judgments by
management. If the estimated fair value of the Company's single reporting is less that its carrying value, an impairment
exists.
• Identifiable Intangible and Other Long-Lived Assets: When performing an intangible asset impairment test, the
Company estimates the fair value of the asset using a discounted cash flow methodology, which includes assumptions
for, among other things, budgets and economic projections, market trends, product development cycles and long-term
discount rates. If the estimated fair value of the asset is less that its carrying value, an impairment exists.
• Facilities-Related Restructuring Accruals: During the years ended December 31, 2011 and 2010, the Company recorded
restructuring accruals associated with exiting all or portions of certain leased facilities and for revised estimates related
to previously exited facilities. The Company estimates the fair value of such liabilities using an income approach based
on observable inputs, including the remaining payments required under the existing lease agreements, utilities costs
based on recent invoice amounts, and potential sublease receipts based on quoted market prices for similar sublease
arrangements. The liabilities are discounted to net present value based on the Company's current borrowing rate. See
Note Q for further information on the Company's restructuring activities.
F. ACCOUNTS RECEIVABLE
Accounts receivable, net of allowances, consisted of the following at December 31, 2011 and 2010 (in thousands):
Accounts receivable
Less:
Allowance for doubtful accounts
Allowance for sales returns and rebates
2011
$ 120,290
(2,342)
(13,643)
$ 104,305
2010
$ 118,320
(3,051)
(14,098)
$ 101,171
The accounts receivable balances at December 31, 2011 and 2010, exclude approximately $10.3 million and $16.1 million,
respectively, for large solution sales and certain distributor sales that were invoiced, but for which revenues had not been
recognized and payments were not then due.
G. INVENTORIES
Inventories consisted of the following at December 31, 2011 and 2010 (in thousands):
Raw materials
Work in process
Finished goods
2011
$ 11,306
415
100,112
$ 111,833
2010
$ 12,147
411
95,799
$ 108,357
At December 31, 2011 and 2010, finished goods inventory included $7.6 million and $12.5 million, respectively, associated with
products shipped to customers or deferred labor costs for revenue arrangements that have not yet been recognized.