Avon 2010 Annual Report Download - page 73

Deferred Software
Certain systems development costs related to the purchase, development and installation of computer software are capitalized and
amortized over the estimated useful life of the related project, not to exceed five years. Costs incurred prior to the development stage, as
well as maintenance, training costs, and general and administrative expenses are expensed as incurred. Other assets included unamortized
deferred software costs of $140.6 at December 31, 2010 and $111.6 at December 31, 2009.
Goodwill and Intangible Assets
Goodwill is not amortized, but rather is assessed for impairment annually and on the occurrence of an event that indicates impairment may
have occurred. Intangible assets with estimable useful lives are amortized using a straight-line method over the estimated useful lives of the
assets. We completed annual goodwill impairment assessments and no adjustments to goodwill were necessary for the years ended
December 31, 2010, 2009 or 2008.
Financial Instruments
We use derivative financial instruments, including interest-rate swap agreements and forward foreign currency contracts to manage interest
rate and foreign currency exposures. We record all derivative instruments at their fair values on the Consolidated Balance Sheets as either
assets or liabilities. See Note 8, Financial Instruments and Risk Management.
Deferred Income Taxes
Deferred income taxes have been provided on items recognized for financial reporting purposes in different periods than for income tax
purposes using tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided for
deferred tax assets if it is more likely than not these items will not be realized. The ultimate realization of our deferred tax assets depends
upon generating sufficient future taxable income during the periods in which our temporary differences become deductible or before our
net operating loss and tax credit carryforwards expire. Deferred taxes are not provided on the portion of unremitted earnings of subsidiaries
outside of the U.S. when management concludes that these earnings are indefinitely reinvested. Deferred taxes are provided on earnings not
considered indefinitely reinvested. At December 31, 2010, U.S. income taxes have not been provided on $2,423.2 of undistributed income
of subsidiaries that has been or is intended to be indefinitely reinvested outside the U.S.
Uncertain Tax Positions
We recognize the benefit of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits
of the position.
Selling, General and Administrative Expenses
Selling, general and administrative expenses include costs associated with selling; marketing; and distribution activities, including shipping
and handling costs; advertising; net brochure costs; research and development; information technology; and other administrative costs,
including finance, legal and human resource functions.
Shipping and Handling
Shipping and handling costs are expensed as incurred and amounted to $968.8 in 2010, $920.0 in 2009 and $950.1 in 2008.
Advertising
Advertising costs, excluding brochure preparation costs, are expensed as incurred and amounted to $400.4 in 2010, $352.7 in 2009 and
$390.5 in 2008.
Net Brochure Costs
Brochure costs amounted to $472.7 in 2010, $481.2 in 2009, and $447.1 in 2008 and were offset by brochure fees of $291.0 in 2010,
$270.0 in 2009, and $264.2 in 2008.
Research and Development
Research and development costs are expensed as incurred and amounted to $72.6 in 2010, $65.4 in 2009 and $69.7 in 2008. Research and
development costs include all costs related to the design and development of new products such as salaries and benefits, supplies and
materials and facilities costs.
A V O N 2010 F-9