Johnson Controls 2013 Annual Report Download - page 40

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40
Company's cash flow forecasts are based on assumptions that are considered reasonable by management and consistent with the
plans and estimates management is using to operate the underlying business, there is significant judgment in determining the
expected future cash flows attributable to the Interiors business. The impairment charge is a non-cash expense that was recorded
within restructuring and impairment costs on the consolidated statement of income and did not adversely affect the Company's
debt position, cash flow, liquidity or compliance with financial covenants.
Indefinite lived other intangible assets are also subject to at least annual impairment testing. Other intangible assets with definite
lives continue to be amortized over their estimated useful lives and are subject to impairment testing if events or changes in
circumstances indicate that the asset might be impaired. A considerable amount of management judgment and assumptions are
required in performing the impairment tests. While the Company believes the judgments and assumptions used in the impairment
tests are reasonable and no impairment existed at September 30, 2013, 2012 and 2011, different assumptions could change the
estimated fair values and, therefore, impairment charges could be required, which could be material to the consolidated financial
statements.
The Company reviews long-lived assets, including property, plant and equipment and other intangible assets with definite lives,
for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable.
The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, “Impairment or Disposal of
Long-Lived Assets.” ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable
cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of
the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable,
an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on
discounted cash flow analysis or appraisals.
In the second, third and fourth quarters of fiscal 2013, the Company concluded it had a triggering event requiring assessment of
impairment for certain of its long-lived assets in conjunction with its restructuring actions announced in fiscal 2013. In addition,
in the fourth quarter of fiscal 2013, the Company concluded that it had a triggering event requiring assessment of impairment for
the long-lived assets held by the Automotive Experience Interiors segment due to the impairment of goodwill in the quarter. As a
result, the Company reviewed the long-lived assets for impairment and recorded a $156 million impairment charge within
restructuring and impairment costs on the consolidated statement of income, of which $13 million was recorded in the second
quarter, $36 million in the third quarter and $107 million in the fourth quarter of fiscal 2013. Of the total impairment charge, $57
million related to the Automotive Experience Interiors segment, $40 million related to the Building Efficiency Other segment, $22
million related to the Automotive Experience Seating segment, $18 million related to the Power Solutions segment, $12 million
related to corporate assets and $7 million related to various segments within the Building Efficiency business. Refer to Note 16,
“Significant Restructuring and Impairment Costs,” of the notes to consolidated financial statements for additional information.
The impairment was measured, depending on the asset, either under an income approach utilizing forecasted discounted cash flows
or a market approach utilizing an appraisal to determine fair values of the impairment assets. These methods are consistent with
the methods the Company employed in prior periods to value other long-lived assets. The inputs utilized in the analyses are
classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement."
In the third and fourth quarters of fiscal 2012, the Company concluded it had a triggering event requiring assessment of impairment
for certain of its long-lived assets in conjunction with its restructuring actions announced in fiscal 2012. In addition, in the fourth
quarter of fiscal 2012, the Company concluded it had a triggering event requiring assessment of impairment for certain of its long-
lived assets due to volume declines in the European automotive markets. As a result, the Company reviewed the long-lived assets
for impairment and recorded a $39 million impairment charge within restructuring and impairment costs on the consolidated
statement of income, of which $3 million was recorded in the third quarter and $36 million in the fourth quarter of fiscal 2012. Of
the total impairment charge, $14 million related to the Power Solutions segment, $11 million related to the Automotive Experience
Interiors segment, $4 million related to the Building Efficiency Other segment and $10 million related to corporate assets. Refer
to Note 16, “Significant Restructuring and Impairment Costs,” of the notes to consolidated financial statements for additional
information. The impairment was measured, depending on the asset, either under an income approach utilizing forecasted discounted
cash flows or a market approach utilizing an appraisal to determine fair values of the impairment assets. These methods are
consistent with the methods the Company employed in prior periods to value other long-lived assets. The inputs utilized in the
analyses are classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement."
In the second quarter of fiscal 2012, the Company recorded a $14 million impairment charge related to an equity investment. Refer
to Note 11, “Fair Value Measurements,” of the notes to consolidated financial statements for additional information.
Investments in partially-owned affiliates (“affiliates”) at September 30, 2013 were $1.0 billion, $76 million higher than the prior
year. The increase was primarily due to positive earnings by affiliates in all businesses, primarily in the Automotive Experience