Henry Schein 2009 Annual Report Download - page 57

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Accounts Receivable and Reserves
The carrying amount of accounts receivable reflects a reserve representing our best estimate of the
amounts that will not be collected. In addition to reviewing delinquent accounts receivable, we consider
many factors in estimating our reserve, including historical data, experience, customer types, credit
worthiness and economic trends. From time to time, we may adjust our assumptions for anticipated changes
in any of these or other factors expected to affect collectibility. Although we believe our judgments, estimates
and/or assumptions related to accounts receivable and reserves are reasonable, making material changes to
such judgments, estimates and/or assumptions could materially affect our financial results.
Inventories and Reserves
Inventories consist primarily of finished goods and are valued at the lower of cost or market. Cost is
determined by the first-in, first-out method for merchandise or actual cost for large equipment and high tech
equipment. In accordance with our policy for inventory valuation, we consider many factors including the
condition and salability of the inventory, historical sales, forecasted sales and market and economic trends.
From time to time, we may adjust our assumptions for anticipated changes in any of these or other factors
expected to affect salability. Although we believe our judgments, estimates and/or assumptions related to
inventory and reserves are reasonable, making material changes to such judgments, estimates and/or
assumptions could materially affect our financial results.
Goodwill and Other Indefinite-Lived Intangible Assets
Goodwill and other indefinite-lived intangible assets (primarily trademarks) are not amortized, but are
subject to at least an annual impairment analysis. Such impairment analyses for goodwill require the
comparison of the fair value to the carrying value of reporting units. Measuring fair value of a reporting unit
is generally based on valuation techniques using multiples of sales or earnings, unless supportable
information is available for using a present value technique, such as estimates of future cash flows. Although
we believe our judgments, estimates and/or assumptions used in determining fair value are reasonable,
making material changes to such judgments, estimates and/or assumptions could materially affect such
impairment analyses and our financial results.
We regard our reporting units to be our operating segments (dental, medical (including animal health),
international and technology). Goodwill was allocated to such reporting units, for the purposes of preparing
our impairment analyses, based on a specific identification basis. Our impairment analysis for indefinite-
lived intangibles consists of a review of historical, current and forecasted sales and gross profit levels, as well
as a review of any factors that may indicate potential impairment. We assess the potential impairment of
goodwill and other indefinite-lived intangible assets annually (at the end of our third quarter) and on an
interim basis whenever events or changes in circumstances indicate that the carrying value may not be
recoverable. There were no events or circumstances from the date of that assessment through December 26,
2009 that impacted our analysis. Some factors we consider important, which could trigger an interim
impairment review, include:
• significant underperformance relative to expected historical or projected future operating results;
• significant changes in the manner of our use of acquired assets or the strategy for our overall business
(e.g., decision to divest a business); or
• significant negative industry or economic trends.
If we determine through the impairment review process that goodwill or other indefinite-lived intangible
assets are impaired, we will record an impairment charge in our consolidated statement of income.