Intel 2014 Annual Report Download - page 65

INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Identified Intangible Assets
Licensed technology and patents are generally amortized on a straight-line basis over the periods of benefit. We amortize all
acquisition-related intangible assets that are subject to amortization over their estimated useful life based on economic benefit.
Acquisition-related in-process R&D assets represent the fair value of incomplete R&D projects that had not reached technological
feasibility as of the date of acquisition; initially, these are classified as “other intangible assets” that are not subject to
amortization. Assets related to projects that have been completed are transferred from “other intangible assets” to “acquisition-
related developed technology;” these are subject to amortization, while assets related to projects that have been abandoned are
impaired and expensed to R&D. In the quarter following the period in which identified intangible assets become fully amortized,
we remove the fully amortized balances from the gross asset and accumulated amortization amounts.
The estimated useful life ranges for substantially all identified intangible assets that are subject to amortization as of
December 27, 2014 were as follows:
(In Years)
Estimated
Useful Life
Acquisition-related developed technology ........................................................... 4–9
Acquisition-related customer relationships .......................................................... 6–9
Acquisition-related trade names .................................................................. 5–8
Licensed technology and patents ................................................................. 5–17
We perform a quarterly review of finite-lived identified intangible assets to determine whether facts and circumstances indicate
that the useful life is shorter than we had originally estimated or that the carrying amount of assets may not be recoverable. If
such facts and circumstances exist, we assess recoverability 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. Impairments, if any,
are based on the excess of the carrying amount over the fair value of those assets. If an asset’s useful life is shorter than
originally estimated, we accelerate the rate of amortization and amortize the remaining carrying value over the new shorter useful
life. 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. If necessary, a quantitative impairment test is performed to compare the fair value of the
indefinite-lived intangible asset with its carrying value. Impairments, if any, are based on the excess of the carrying amount over
the fair value of those assets.
For further discussion of identified intangible assets, see “Note 11: Identified Intangible Assets.”
Product Warranty
The vast majority of our products are sold with a limited warranty on product quality and a limited indemnification for customers
against intellectual property rights infringement claims related to our products. The accrual and the related expense for known
product warranty issues were not significant during the periods presented. Due to product testing, the short time typically between
product shipment and the detection and correction of product failures, and 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.
Revenue Recognition
We recognize net product revenue when the earnings process is complete, as evidenced by an agreement with the customer,
delivery has occurred, and acceptance, if applicable, as well as fixed pricing and probable collectibility. We record pricing
allowances, including discounts based on contractual arrangements with customers, when we recognize revenue as a reduction
to both accounts receivable and net revenue. Because of frequent sales price reductions and rapid technology obsolescence in
the industry, we defer product revenue and related costs of sales from component sales made to distributors under agreements
allowing price protection or right of return until the distributors sell the merchandise. The right of return granted generally consists
of a stock rotation program in which distributors are able to exchange certain products based on the number of qualified
purchases made by the distributor. Under the price protection program, we give distributors credits for the difference between the
original price paid and the current price that we offer. We include shipping charges billed to customers in net revenue, and include
the related shipping costs in cost of sales.
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