Kimberly-Clark 2007 Annual Report Download - page 65

KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Training and data conversion costs are expensed as incurred. Computer software costs are amortized on the straight-
line method over the estimated useful life of the software, which generally does not exceed five years.
Estimated useful lives are periodically reviewed and, when warranted, changes are made to them. Long-
lived assets, including computer software, are reviewed for impairment whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable. An impairment loss would be
indicated when estimated undiscounted future cash flows from the use and eventual disposition of an asset group,
which are identifiable and largely independent of the cash flows of other asset groups, are less than the carrying
amount of the asset group. Measurement of an impairment loss would be based on the excess of the carrying
amount of the asset over its fair value. Fair value is measured using discounted cash flows or independent
appraisals, as appropriate. When property is sold or retired, the cost of the property and the related accumulated
depreciation are removed from the Consolidated Balance Sheet and any gain or loss on the transaction is included
in income.
The cost of major maintenance performed on manufacturing facilities, composed of labor, materials and
other incremental costs, is charged to operations as incurred. Start-up costs for new or expanded facilities are
expensed as incurred.
Conditional Asset Retirement Obligations
The liability for the estimated costs to settle obligations in connection with the retirement of long-lived
assets is determined in accordance with the requirements of Financial Accounting Standards Board (“FASB”)
Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations—an Interpretation of FASB
Statement No. 143 (“FIN 47”), which the Corporation adopted on December 31, 2005. In connection with the
adoption of FIN 47, the Corporation recorded a pretax asset retirement liability of $23.6 million at the end of
2005. FIN 47 requires the recording of an asset retirement obligation when the fair value of such a liability can
be reasonably estimated, even though uncertainty exists as to the timing and/or the method of settlement. The
Corporation has no plans in the foreseeable future to retire any of the major facilities for which it estimated an
asset retirement obligation.
The cumulative effect on 2005 income, net of related income tax effects, of recording the asset retirement
obligation was $12.3 million, or $.03 per share.
Goodwill and Other Intangible Assets
Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses.
Goodwill is not amortized, but rather is tested for impairment annually and whenever events and circumstances
indicate that an impairment may have occurred. Impairment testing compares the carrying amount of the goodwill
with its fair value. Fair value is estimated based on discounted cash flows. When the carrying amount of goodwill
exceeds its fair value, an impairment charge would be recorded. The Corporation has completed the required annual
testing of goodwill for impairment and has determined that its goodwill is not impaired.
The Corporation has no intangible assets with indefinite useful lives. Intangible assets with finite lives are
amortized over their estimated useful lives and are reviewed for impairment whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable. An impairment loss would be
indicated when estimated undiscounted future cash flows from the use of the asset are less than its carrying
amount. An impairment loss would be measured as the difference between the fair value (based on discounted
future cash flows) and the carrying amount of the asset.
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