Ingram Micro 2006 Annual Report Download - page 67

internal-use software and defined criteria for capitalization in accordance with Statement of Position No. 98-1,
“Accounting for the Cost of Computer Software Developed or Obtained for Internal Use.” Leasehold improvements
are amortized over the shorter of the lease term or the estimated useful life. Depreciable lives of property and
equipment are as follows:
Buildings ........................................................... 40years
Leasehold improvements................................................ 3-17 years
Distribution equipment ................................................. 5-10 years
Computer equipment and software ........................................ 3-5years
Maintenance, repairs and minor renewals are charged to expense as incurred. Additions, major renewals and
betterments to property and equipment are capitalized.
Long-Lived and Intangible Assets
In accordance with Statement of Financial Accounting Standards No. 144 “Accounting for the Impairment or
Disposal of Long-Lived Assets,” the Company assesses potential impairments to its long-lived assets when events
or changes in circumstances indicate that the carrying amount may not be fully recoverable. If required, an
impairment loss is recognized as the difference between the carrying value and the fair value of the assets.
Identifiable intangible assets with indefinite useful lives, consisting primarily of trademarks, were $24,200 at
December 30, 2006 and December 31, 2005. The remaining identifiable intangible assets of $93,149 and $92,855 at
December 30, 2006 and December 31, 2005 are amortized over their remaining estimated lives ranging from 1 to
10 years. Amortization expense was $11,536 and $10,673 for the years ended December 30, 2006 and December 31,
2005.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired in
an acquisition accounted for using the purchase method. The Company adopted the provisions of Statement of
Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“FAS 142”) in 2002. FAS 142
eliminated the amortization of goodwill. FAS 142 requires that after the initial impairment review upon adoption,
goodwill should be reviewed at least annually thereafter. In the fourth quarters of 2006, 2005 and 2004, the
Company performed its annual impairment tests of goodwill in North America, Europe and Asia-Pacific. The
valuation methodologies included, but were not limited to, estimated net present value of the projected future cash
flows of these reporting units. In connection with 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.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist
principally of trade accounts receivable and derivative financial instruments. Credit risk with respect to trade
accounts receivable is limited due to the large number of customers and their dispersion across geographic areas. No
single customer accounts for 10% or more of the Company’s net sales. The Company performs ongoing credit
evaluations of its customers’ financial conditions, obtains credit insurance in certain locations and requires
collateral in certain circumstances. The Company maintains an allowance for estimated credit losses.
Derivative Financial Instruments
The Company operates in various locations around the world. The Company reduces its exposure to
fluctuations in interest rates and foreign exchange rates by creating offsetting positions through the use of
derivative financial instruments. The market risk related to the foreign exchange agreements is offset by changes in
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INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)