Intel 2013 Annual Report Download - page 37

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For reporting units in which the impairment assessment concludes that it is more likely than not that the fair value is
less than its carrying value, we perform the first step of the goodwill impairment test, which compares the fair value
of the reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net
assets assigned to that unit, goodwill is not considered impaired and we are not required to perform additional
analysis. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting
unit, then we must perform the second step of the goodwill impairment test to determine the implied fair value of the
reporting unit’s goodwill. If we determine during the second step that the carrying value of a reporting unit’s goodwill
exceeds its implied fair value, we record an impairment loss equal to the difference.
Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. Our goodwill
impairment test uses a weighting of the income method and the market method to estimate a reporting unit’s fair
value. The income method is based on a discounted future cash flow approach that uses the following reporting unit
estimates: revenue, based on assumed market segment growth rates and our assumed market segment share;
estimated costs; and appropriate discount rates based on a reporting unit's weighted average cost of capital as
determined by considering the observable weighted average cost of capital of comparable companies. Our
estimates of market segment growth, our market segment share, and costs are based on historical data, various
internal estimates, and a variety of external sources. These estimates are developed as part of our routine long-
range planning process. The same estimates are also used in planning for our long-term manufacturing and
assembly and test capacity needs as part of our capital budgeting process, and for long-term and short-term
business planning and forecasting. We test the reasonableness of the inputs and outcomes of our discounted cash
flow analysis against available comparable market data. The market method is based on financial multiples of
comparable companies and applies a control premium. A reporting unit’s carrying value represents the assignment
of various assets and liabilities, excluding certain corporate assets and liabilities, such as cash, investments, and
debt.
For the annual impairment assessment in 2013, we determined that for each of our reporting units with significant
amounts of goodwill, it was more likely than not that the fair value of the reporting units exceeded the carrying
value. As a result, we concluded that performing the first step of the goodwill impairment test was not necessary for
those reporting units. During the fourth quarter of each of the prior three fiscal years, we have completed our annual
impairment assessments and concluded that goodwill was not impaired in any of these years.
Identified Intangibles
We make judgments about the recoverability of purchased finite-lived intangible assets whenever events or
changes in circumstances indicate that an impairment may exist. Recoverability of finite-lived intangible assets is
measured by comparing the carrying amount of the asset to the future undiscounted cash flows that the asset is
expected to generate. We perform an annual impairment assessment in the fourth quarter of each year for
indefinite-lived intangible assets, or more frequently if indicators of potential impairment exist, to determine whether
it is more likely than not that the carrying value of the assets may not be recoverable. Recoverability of indefinite-
lived intangible assets is measured by comparing the carrying amount of the asset to the future discounted cash
flows that the asset is expected to generate. If we determine that an individual asset is impaired, the amount of any
impairment is measured as the difference between the carrying value and the fair value of the impaired asset.
The assumptions and estimates used to determine future values and remaining useful lives of our intangible and
other long-lived assets are complex and subjective. They can be affected by various factors, including external
factors such as industry and economic trends, and internal factors such as changes in our business strategy and
our forecasts for specific product lines. Based on our impairment assessment, we recognized impairment charges
of $17 million in 2013 ($21 million in 2012 and $10 million in 2011).
Income Taxes
We must make estimates and judgments in determining the provision for taxes for financial statement purposes.
These estimates and judgments occur in the calculation of tax credits, benefits, and deductions, and in the
calculation of certain tax assets and liabilities that arise from differences in the timing of recognition of revenue and
expense for tax and financial statement purposes, as well as the interest and penalties related to uncertain tax
positions. Significant changes in these estimates may result in an increase or decrease to our tax provision in a
subsequent period.
Table of Contents
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)