LensCrafters 2005 Annual Report Download - page 110

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS | 109 <
Estimated useful life
Buildings and building improvements 19 to 40 years
Machinery and equipment 3 to 12 years
Aircraft 25 years
Other equipment 5 to 8 years
Leasehold improvements lesser of 10 years or the remaining life of the lease
Maintenance and repair expenses are expensed as incurred. Upon the sale or disposition of property
and equipment, the cost of the asset and the related accumulated depreciation and leasehold
amortization are removed from the accounts and any resulting gain or loss is included in the Statements
of Consolidated Income.
Capitalized leased property - Capitalized leased assets are amortized using the straight-line method
over the term of the lease, or in accordance with practices established for similar owned assets if
ownership transfers to the Company at the end of the lease term.
Goodwill - Goodwill represents the excess of the purchase price (including acquisition-related
expenses) over the value assigned to the net tangible and identifiable intangible assets acquired. The
Company’s goodwill is tested annually for impairment as of December 31 of each year in accordance
with SFAS No. 142, Goodwill and other intangible assets (“SFAS 142”). Additional impairment tests are
performed if, for any reason, the Company believes that an event has occurred that may impair
goodwill. Such tests are performed at the reporting unit level which consists of two units, Wholesale
and Retail, as required by the provisions of SFAS 142. For the years ended December 31, 2003, 2004
and 2005, the result of this process was the determination that the carrying value of each reporting unit
of the Company was not impaired and, as a result, the Company has not recorded a goodwill
impairment charge.
Trade names and other intangibles - In connection with various acquisitions, Luxottica Group has
recorded as intangible assets certain trade names and other intangibles which the Company believes
have a finite life. Trade names are amortized on a straight-line basis over periods ranging from 20 to 25
years (see Note 6). Other intangibles include, among other items, distributor networks, customer lists
and contracts, franchise agreements and license agreements, and are amortized over the respective
useful lives. All intangibles are subject to test for impairment in accordance with SFAS No. 144,
Accounting for the impairment or disposal of long-lived assets (“SFAS 144”). Aggregate amortization
expense of trade names and other intangibles for the years ended December 31, 2003, 2004 and 2005
was Euro 42.6 million, Euro 51.6 million and Euro 64.6 million, respectively.
Impairment of long-lived assets - Luxottica Group’s long-lived assets, other than goodwill, are tested
for impairment whenever events or changes in circumstances indicate that the net carrying amount
may not be recoverable. When such events occur, the Company measures impairment by comparing
the carrying value of the long-lived asset to the estimated undiscounted future cash flows expected to
result from the use of the long-lived assets and their eventual disposition. If the sum of the expected
undiscounted future cash flows were less than the carrying amount of the long-lived assets, the
Company would record an impairment loss, if determined to be necessary. Such impairment loss is
measured as the amount by which the carrying amount of the long-lived asset exceeds the fair value in
accordance with SFAS 144. The aggregate impairment loss on certain non-performing long-lived
assets charged to the Statements of Consolidated Income during fiscal 2005 was not material and
there was no impairment loss charged in fiscal 2003 and 2004.