Kodak 2011 Annual Report Download - page 66

DERIVATIVE FINANCIAL INSTRUMENTS
All derivative instruments are recognized as either assets or liabilities and are measured at fair value. Certain derivatives are designated and
accounted for as hedges. The Company does not use derivatives for trading or other speculative purposes. See Note 13, “Financial Instruments.”
CASH EQUIVALENTS
All highly liquid investments with a remaining maturity of three months or less at date of purchase are considered to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. The cost of all of the Company’s inventories is determined by either the “first in, first
out” (“FIFO”) or average cost method, which approximates current cost. The Company provides inventory reserves for excess, obsolete or slow-
moving inventory based on changes in customer demand, technology developments or other economic factors.
PROPERTIES
Properties are recorded at cost, net of accumulated depreciation. The Company capitalizes additions and improvements. Maintenance and repairs are
charged to expense as incurred. The Company calculates depreciation expense using the straight-line method over the assets’ estimated useful lives,
which are as follows:
The Company depreciates leasehold improvements over the shorter of the lease term or the asset’s estimated useful life. Upon sale or other
disposition, the applicable amounts of asset cost and accumulated depreciation are removed from the accounts and the net amount, less proceeds from
disposal, is charged or credited to net (loss) earnings.
GOODWILL
Goodwill represents the excess of purchase price of an acquisition over the fair value of net assets acquired. Goodwill is not amortized, but is required
to be assessed for impairment at least annually. The Company has elected September 30 as the annual impairment assessment date for all of its
reporting units, and will perform additional impairment tests when events or changes in circumstances occur that would more likely than not reduce the
fair value of the reporting unit below its carrying amount. A reporting unit is defined as an operating segment or one level below an operating
segment. During 2011, the Company estimated the fair value of its reporting units utilizing an income approach through the application of a discounted
cash flow method. During 2010, the Company estimated the fair value of its reporting units utilizing income and market approaches through the
application of discounted cash flow and market comparable methods, respectively. The assessment is performed in two steps, step one to test for a
potential impairment of goodwill and, if potential losses are identified, step two to measure the impairment loss. Determining the fair value of a
reporting unit involves the use of significant estimates and assumptions.
The Company recorded pre-tax goodwill impairment charges of $8 million and $626 million in 2011 and 2010, respectively. See Note 6, “Goodwill
and Other Intangible Assets.”
REVENUE
The Company’s revenue transactions include sales of the following: products; equipment; software; services; integrated solutions; and intellectual
property licensing. The Company recognizes revenue when realized or realizable and earned, which is when the following criteria are met: (1)
persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the sales price is fixed or determinable;
Years
Buildings and building improvements
5
-
40
Land improvements
20
Leasehold improvements
3
-
20
Equipment
3
-
15
Tooling
1
-
3
Furniture and fixtures
5
-
10
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