Intel 2005 Annual Report Download - page 61

Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Property, Plant and Equipment
Property, plant and equipment, net at fiscal year-ends was as follows:
Property, plant and equipment is stated at cost. Depreciation is computed for financial reporting purposes principally using the straight-line method
over the following estimated useful lives: machinery and equipment, 2–4 years; buildings, 4–40 years. Reviews are regularly performed if facts and
circumstances exist which indicate that the carrying amount of assets may not be recoverable or that the useful life is shorter than originally estimated.
The company assesses the recoverability of its assets held for use by comparing the projected undiscounted net cash flows associated with the related
asset or group of assets over their remaining lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying
amount over the fair value of those assets. If assets are determined to be recoverable, but the useful lives are shorter than originally estimated, the net
book value of the assets is depreciated over the newly determined remaining useful lives.
Goodwill
Goodwill is recorded when the purchase price of an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets
acquired. The company performs an impairment review for each reporting unit using a fair value approach. Reporting units may be operating segments
as a whole or an operation one level below an operating segment, referred to as a component. In determining the carrying value of the reporting unit,
an allocation of the company’s manufacturing and assembly and test assets must be made because of the interchangeable nature of the company’s
manufacturing and assembly and test capacity. This allocation is based on each reporting unit’
s relative percentage utilization of the manufacturing and
assembly and test assets. For further discussion of goodwill, see “Note 14: Goodwill.”
Identified Intangible Assets
Acquisition-related intangibles include developed technology and customer lists that are amortized on a straight-line basis over periods ranging from
2–6 years. Also included in acquisition-related intangibles is workforce-in -place related to acquisitions that did not qualify as business combinations.
Intellectual property assets primarily represent rights acquired under technology licenses and are amortized over the periods of benefit, ranging from
2–10 years, generally on a straight-line basis. All identified intangible assets are classified within other assets on the balance sheet. In the quarter
following the period in which identified intangible assets become fully amortized, the fully amortized balances are removed from the gross asset and
accumulated amortization amounts.
The company performs a quarterly review of its identified intangible assets to determine if facts and circumstances exist which indicate that the useful
life is shorter than originally estimated or that the carrying amount of assets may not be recoverable. If such facts and circumstances do exist, the
company assesses the recoverability of identified intangible assets by comparing the projected undiscounted net cash flows associated with the related
asset or group of assets over their remaining lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying
amount over the fair value of those assets.
Product Warranty
The company generally sells products with a limited warranty of product quality and a limited indemnification of customers against intellectual
property infringement claims related to the company’s products. The company accrues for known warranty and indemnification issues if a loss is
probable and can be reasonably estimated, and accrues for estimated incurred but unidentified issues based on historical activity. The accrual and the
related expense for known issues were not significant during the periods presented. Due to product testing and the short time typically between product
shipment and the detection and correction of product failures, and considering the historical rate of payments on indemnification claims, the accrual
and related expense for estimated incurred but unidentified issues were not significant during the periods presented.
57
(In Millions)
2005
2004
Land and buildings
$
13,938
$
13,277
Machinery and equipment
27,297
24,561
Construction in progress
2,897
1,995
44,132
39,833
Less accumulated depreciation
(27,021
)
(24,065
)
Total property, plant and equipment, net
$
17,111
$
15,768