Creative 2002 Annual Report Download - page 29

Download and view the complete annual report

Please find page 29 of the 2002 Creative annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 56

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56

27
Goodwill and other intangible assets
Goodwill and other intangible assets are stated at cost and relate principally to the acquisition of new subsidiaries accounted
for under the purchase method. Under this method, the purchase price has been allocated to the assets acquired, liabilities
assumed and in-process technology based on their estimated fair market values at the dates of acquisition. Amounts
allocated to acquired in-process technology are expensed in the period in which the acquisition is consummated. The
goodwill and identifiable intangible assets acquired in connection with the acquisition of 3Dlabs have been accounted for
in accordance with SFAS 141 and SFAS 142, “Business Combinations” and “Goodwill and Other Intangible Assets.”
Intangible assets are amortized on a straight line basis over the estimated useful lives of the assets, ranging from one to
seven years. Goodwill is not subject to amortization, but will be evaluated at least annually for impairment.
Creative reviews for impairment of goodwill and other intangible assets whenever events indicate that the carrying
amount might not be recoverable. Factors that Creative may consider important which could trigger an impairment
review include the followings:
• significant under performance relative to expected historical or projected future operating results;
• significant changes in the manner of use of the acquired assets or the strategy for Creative’s overall business;
• significant negative industry or economic trends;
• significant decline in Creative’s stock price for a sustained period; and
• Creative market capitalization relative to net book value.
When Creative determines that the carrying value of goodwill and other intangibles assets may not be recoverable based
upon the existence of one or more of the above indicators, Creative measures any impairment based on a projected
discounted cash flow method using a discount rate determined by the management to be commensurate with the risk
inherent in Creative’s current business model.
A summary of goodwill and other intangible assets are as follows (in US$’000):
As of June 30
2002 2001
Gross carrying value:
Goodwill $ 91,976 $ –
Other intangible assets 33,682 45,461
Total gross carrying value 125,658 45,461
Accumulated amortization:
Goodwill ––
Other intangible assets (15,788) (41,604)
Total accumulated amortization (15,788) (41,604)
Net goodwill and other intangible assets $ 109,870 $ 3,857
Goodwill and other intangible assets fully amortized were excluded from above. Other intangible assets amortization
expense was $5.2 million, $6.3 million and $12.8 million for fiscal year 2002, 2001 and 2000, respectively, and estimated
to be $9.1 million in fiscal year 2003 and $1.8 million each in fiscal year 2004 to fiscal 2007.