Kodak 2015 Annual Report Download - page 18

products sold as part of a multiple element arrangement include software maintenance agreements as well as unspecified upgrades or enhancements on a when-and-
if-available basis. In multiple element arrangements where non-essential software deliverables are included, revenue is allocated to non-software and to software
deliverables each as a group based on relative selling prices of each of the deliverables in the arrangement. Revenue allocated to software licenses is recognized
when all revenue recognition criteria have been met. Revenue generated from maintenance and unspecified upgrades or updates on a when-and-if-available basis is
recognized over the contract period.
RESEARCH AND DEVELOPMENT COSTS
Research and development (“R&D”) costs, which include costs incurred in connection with new product development, fundamental and exploratory research,
process improvement, product use technology and product accreditation, are expensed in the period in which they are incurred.
ADVERTISING
Advertising costs are expensed as incurred and are included in Selling, general and administrative expenses in the accompanying Consolidated Statement of
Operations. Advertising expenses amounted to $8 million, $13 million, $6 million and $14 million for the years ended December 31, 2015 and December 31, 2014,
four months ended December 31, 2013, and for the eight months ended August 31, 2013, respectively.
SHIPPING AND HANDLING COSTS
Amounts charged to customers and costs incurred by Kodak related to shipping and handling are included in net sales and cost of sales, respectively.
IMPAIRMENT OF LONG-LIVED ASSETS
The carrying values of long-lived assets, other than goodwill and intangible assets with indefinite useful lives, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying values may not be recoverable. In connection with fresh start accounting, the carrying values of long-lived
assets were adjusted to estimated fair value as of September 1, 2013 and Kodak revised its estimates of the remaining useful lives of all long-lived assets. Refer to
Note 25, “Fresh Start Accounting.”
The recoverability of the carrying values of long-lived assets is assessed by first grouping long-lived assets with other assets and liabilities at the lowest level for
which identifiable cash flows are largely independent of the cash flows of other assets and liabilities (the asset group) and, secondly, by estimating the
undiscounted future cash flows that are directly associated with and that are expected to arise from the use of and eventual disposition of such asset group. Kodak
estimates the undiscounted cash flows over the remaining useful life of the primary asset within the asset group. If the carrying value of the asset group exceeds the
estimated undiscounted cash flows, Kodak records an impairment charge to the extent the carrying value of the long-lived asset exceeds its fair value. Kodak
determines fair value through quoted market prices in active markets or, if quoted market prices are unavailable, through the performance of internal analyses of
discounted cash flows.
The remaining useful lives of long-lived assets are reviewed in connection with the assessment of recoverability of long-lived assets and the ongoing strategic
review of the business and operations. If the review indicates that the remaining useful life of the long-lived asset has changed significantly, the depreciation on that
asset is adjusted to facilitate full cost recovery over its revised estimated remaining useful life.
The carrying values of indefinite-lived intangible assets are evaluated for potential impairment annually or whenever events or changes in circumstances indicate
that it is more likely than not that the asset is impaired. Refer to Note 5, “Goodwill and Other Intangible Assets.”
INCOME TAXES
Kodak recognizes deferred tax liabilities and assets for the expected future tax consequences of operating losses, credit carry-forwards and temporary differences
between the carrying amounts and tax basis of Kodak’s assets and liabilities. Kodak records a valuation allowance to reduce its net deferred tax assets to the
amount that is more likely than not to be realized. For discussion of the amounts and components of the valuation allowances as of December 31, 2015 and 2014,
see Note 14, “Income Taxes.”
17