Columbia Sportswear 2012 Annual Report Download - page 51

COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
47
Inventories:
Inventories are carried at the lower of cost or market. Cost is determined using the first-in, first-out method. The
Company periodically reviews its inventories for excess, close-out or slow moving items and makes provisions as necessary
to properly reflect inventory value.
Property, plant, and equipment:
Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets. The principal estimated useful lives are: buildings and
building improvements, 15-30 years; land improvements, 15 years; furniture and fixtures, 3-10 years; and machinery and
equipment, 3-5 years. Leasehold improvements are depreciated over the lesser of the estimated useful life of the improvement,
which is most commonly 7 years, or the remaining term of the underlying lease.
Improvements to property, plant and equipment that substantially extend the useful life of the asset are capitalized.
Repair and maintenance costs are expensed as incurred. Internal and external costs directly related to the development of
internal-use software during the application development stage, including costs incurred for third party contractors and
employee compensation, are capitalized and depreciated over a 3-7 year estimated useful life.
Impairment of long-lived assets:
Long-lived assets are amortized over their estimated useful lives and are measured for impairment only when events
or circumstances indicate the carrying value may be impaired. In these cases, the Company estimates the future undiscounted
cash flows to be derived from the asset or asset group to determine whether a potential impairment exists. When reviewing
for retail store impairment, identifiable cash flows are measured at the individual store level. If the sum of the estimated
undiscounted cash flows is less than the carrying value of the asset, the Company recognizes an impairment loss, measured
as the amount by which the carrying value exceeds the estimated fair value of the asset. Impairment charges for long-lived
assets are included in selling, general and administrative (“SG&A”) expense and were $1,653,000, $6,211,000 and
$3,003,000 for the years ended December 31, 2012, 2011 and 2010, respectively. All charges during the three years ended
December 31, 2012 were recorded in the United States and EMEA regions.
Intangible assets and goodwill:
Goodwill and intangible assets with indefinite useful lives are not amortized but are periodically evaluated for
impairment. Intangible assets that are determined to have finite lives are amortized using the straight-line method over their
useful lives and are measured for impairment only when events or circumstances indicate the carrying value may be impaired.
Impairment of goodwill and intangible assets:
The Company reviews and tests its goodwill and intangible assets with indefinite useful lives for impairment in the
fourth quarter of each year and when events or changes in circumstances indicate that the carrying amount of such assets
may be impaired. The Company’s intangible assets with indefinite lives consist of trademarks and tradenames. Substantially
all of the Company’s goodwill is recorded in the United States segment and impairment testing for goodwill is performed
at the reporting unit level. In the impairment test for goodwill, the two-step process first compares the estimated fair value
of the reporting unit with the carrying amount of that reporting unit. The Company estimates the fair value of its reporting
units using a combination of discounted cash flow analysis, comparisons with the market values of similar publicly traded
companies and other operating performance based valuation methods, as necessary. If step one indicates impairment, step
two compares the estimated fair value of the reporting unit to the estimated fair value of all reporting unit assets and liabilities,
except goodwill, to determine the implied fair value of goodwill. The Company calculates impairment as the excess of
carrying amount of goodwill over the implied fair value of goodwill. In the impairment test for trademarks, the Company
compares the estimated fair value of the asset to the carrying amount. The fair value of trademarks and tradenames is
estimated using the relief from royalty approach, a standard form of discounted cash flow analysis used in the valuation of