Ingram Micro 2006 Annual Report Download - page 48

these tests, valuations of the individual reporting units were obtained or updated from an independent third-
party valuation firm. No impairment was indicated based on these tests. However, if actual results are
substantially lower than our projections underlying these valuations, or if market discount rates increase, our
future valuations could be adversely affected, potentially resulting in future impairment charges.
We also assess potential impairment of our goodwill, intangible assets and other long-lived assets when there
is evidence that recent events or changes in circumstances have made recovery of an asset’s carrying value
unlikely. The amount of an impairment loss would be recognized as the excess of the asset’s carrying value
over its fair value. Factors which may cause impairment include significant changes in the manner of use of
these assets, negative industry or economic trends, and significant underperformance relative to historical or
projected future operating results.
•Income Taxes — As part of the process of preparing our consolidated financial statements, we estimate our
income taxes in each of the taxing jurisdictions in which we operate. This process involves estimating our
actual current tax expense together with assessing any temporary differences resulting from the different
treatment of certain items, such as the timing for recognizing revenues and expenses for tax and financial
reporting purposes. These differences may result in deferred tax assets and liabilities, which are included in
our consolidated balance sheet. We are required to assess the likelihood that our deferred tax assets, which
include net operating loss carryforwards, tax credits and temporary differences that are expected to be
deductible in future years, will be recoverable from future taxable income or other tax planning strategies. If
recovery is not likely, we provide a valuation allowance based on our estimates of future taxable income in
the various taxing jurisdictions, and the amount of deferred taxes that are ultimately realizable.
The provision for tax liabilities involves evaluations and judgments of uncertainties in the interpretation of
complex tax regulations by various taxing authorities. In situations involving uncertain tax positions, we
provide for tax liabilities when we consider it probable that additional taxes will be due. As additional
information becomes available, or these uncertainties are resolved with the taxing authorities, revisions to
these liabilities may be required, resulting in additional provision for or benefit from income taxes in our
consolidated income statement.
•Contingencies and Litigation — There are various claims, lawsuits and pending actions against us, not
otherwise noted in Item 3, and which are incidental to our operations. If a loss arising from these actions is
probable and can be reasonably estimated, we record the amount of the estimated loss. If the loss is estimated
using a range within which no point is more probable than another, the minimum estimated liability is
recorded. Based on current available information, we believe that the ultimate resolution of these actions will
not have a material adverse effect on our consolidated financial statements (see Note 10 to our consolidated
financial statements). As additional information becomes available, we assess any potential liability related
to these actions and may need to revise our estimates. Future revisions of our estimates could materially
impact our consolidated results of operations, cash flows or financial position.
Results of Operations
We do not allocate stock-based compensation recognized under FAS 123R to our operating units; therefore, we
are reporting this as a separate amount. The following tables set forth our net sales by geographic region (excluding
intercompany sales) and the percentage of total net sales represented thereby, as well as operating income and
operating margin by geographic region for each of the fiscal years indicated (in millions).
2006 2005 2004
Net sales by geographic region:
North America ........................ $13,585 43.3% $12,217 42.4% $11,777 46.3%
Europe .............................. 10,754 34.3 10,424 36.2 9,839 38.6
Asia-Pacific........................... 5,537 17.7 4,843 16.8 2,742 10.8
Latin America ......................... 1,481 4.7 1,324 4.6 1,104 4.3
Total ................................ $31,357 100.0% $28,808 100.0% $25,462 100.0%
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