HP 2015 Annual Report Download - page 106

Table of Contents
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implied control premium (the excess of the sum of the reporting units' fair value over HP's market capitalization). HP evaluates the control premium by
comparing it to observable control premiums from recent comparable transactions. If the implied control premium is not believed to be reasonable in light of
these recent transactions, HP reevaluates reporting unit fair values, which may result in an adjustment to the discount rate and/or other assumptions. This
reevaluation could result in a change to the estimated fair value for certain or all reporting units.
If the fair value of a reporting unit exceeds the carrying amount of the net assets assigned to that reporting unit, goodwill is not impaired and no further
testing is required. If the fair value of the reporting unit is less than its carrying amount, then HP performs the second step of the goodwill impairment test to
measure the amount of impairment loss, if any. In the second step, HP measures the reporting unit's assets, including any unrecognized intangible assets,
liabilities and non-controlling interests at fair value in a hypothetical analysis to calculate the implied fair value of goodwill for the reporting unit in the
same manner as if the reporting unit was being acquired in a business combination. If the implied fair value of the reporting unit's goodwill is less than its
carrying amount, the difference is recorded as an impairment loss.
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HP reviews intangible assets with finite lives and long-lived assets for impairment whenever events or changes in circumstances indicate the carrying
amount of an asset may not be recoverable. HP assesses the recoverability of assets based on the estimated undiscounted future cash flows expected to result
from the use and eventual disposition of the asset. If the undiscounted future cash flows are less than the carrying amount, the asset is impaired. HP measures
the amount of impairment loss, if any, as the difference between the carrying amount of the asset and its fair value using an income approach or, when
available and appropriate, using a market approach. HP amortizes intangible assets with finite lives using the straight-line method over the estimated
economic lives of the assets, ranging from one to ten years.
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Debt and marketable equity securities are generally considered available-for-sale and are reported at fair value with unrealized gains and losses, net of
applicable taxes, in Accumulated other comprehensive loss in the Consolidated Balance Sheets. Realized gains and losses for available-for-sale securities are
calculated based on the specific identification method and included in Interest and other, net in the Consolidated Statements of Earnings. HP monitors its
investment portfolio for potential impairment on a quarterly basis. When the carrying amount of an investment in debt securities exceeds its fair value and
the decline in value is determined to be other-than-temporary (i.e., when HP does not intend to sell the debt securities and it is not more likely than not that
HP will be required to sell the debt securities prior to anticipated recovery of its amortized cost basis), HP records an impairment charge to Interest and other,
net in the amount of the credit loss and the balance, if any, is recorded in Accumulated other comprehensive loss in the Consolidated Balance Sheets.
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HP uses derivative instruments, primarily forwards, swaps, and at times, options, to hedge certain foreign currency and interest rate exposures. HP also
may use other derivative instruments not
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Source: HP INC, 10-K, December 16, 2015 Powered by Morningstar® Document Research℠
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