HP 2011 Annual Report Download - page 110

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 7: Goodwill and Purchased Intangible Assets (Continued)
At October 31, 2011 and at October 31, 2010, $4.7 billion and $2.5 billion, respectively, of
intangible assets reached the end of their amortizable periods. The tables above reflect the elimination
of the cost and accumulated amortization of such assets.
HP also performed its annual impairment test for all other reporting units and for the
indefinite-lived Compaq trade name. As a result of the analysis, HP concluded that no impairment of
goodwill existed as of August 1, 2011, apart from the impairment in the webOS device business
discussed above. There was no impairment of goodwill and indefinite-lived intangible assets as of
August 1, 2010. However, future impairment tests could result in a charge to earnings. The excess of
fair value over carrying value for the indefinite-lived Compaq trade name is approximately $144 million
as of August 1, 2011, the annual testing date. In order to evaluate the sensitivity of the fair value
calculation, we applied a hypothetical 10% decrease to the fair value of the intangible, which resulted
in an excess of fair value over carrying value of approximately $13 million. In addition, if a future
change in HP’s branding strategy resulted in the reclassification of the Compaq trade name from an
indefinite-lived intangible to a definite-lived intangible, there would be a significant decrease in the fair
value of the asset.
HP will continue to evaluate goodwill and indefinite-lived intangibles on an annual basis as of the
beginning of its fourth fiscal quarter, or whenever events, changes in circumstances or changes in
management’s business strategy indicate that there may be a potential indicator of impairment.
The finite-lived purchased intangible assets consist of customer contracts, customer lists and
distribution agreements, which have weighted-average useful lives of 8 years, and developed and core
technology, patents and product trademarks, which have weighted-average useful lives of 7 years.
Estimated future amortization expense related to finite-lived purchased intangible assets at
October 31, 2011 is as follows:
Fiscal year: In millions
2012 ................................................................ $1,885
2013 ................................................................ 1,732
2014 ................................................................ 1,410
2015 ................................................................ 1,237
2016 ................................................................ 1,073
Thereafter ............................................................ 2,130
Total ................................................................ $9,467
Note 8: Restructuring Charges
HP records restructuring charges associated with management-approved restructuring plans to
either reorganize one or more of HP’s business segments, or to remove duplicative headcount and
infrastructure associated with one or more business acquisitions. Restructuring charges can include
severance costs to eliminate a specified number of employee positions, infrastructure charges to vacate
facilities and consolidate operations, and contract cancellation cost. Restructuring charges are recorded
based upon planned employee termination dates and site closure and consolidation plans. The timing
of associated cash payments is dependent upon the type of restructuring charge and can extend over a
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