Logitech 2013 Annual Report Download - page 101

Peripherals
Key assumptions used in the Step 1 income approach analyses for our peripherals reporting unit included
the appropriate discount rates, CAGR during the forecast period, and long-term growth rates for purposes of
determining a terminal value at the end of the discrete forecast period. Sensitivity assessment of key assumptions
for the peripherals reporting unit Step 1 test is presented below.
• Discount rate assumptions. A hypothetical percentage increase of 108% in the discount rate, holding all
other assumptions constant, would not have decreased the fair value of the peripherals reporting unit
below its carrying value, and thus it would not result in the reporting unit failing Step 1 of the goodwill
impairment test.
• CAGR assumptions. A hypothetical percentage decrease of 600% in the CAGR rate, holding all other
assumptions constant, would not have decreased the fair value of the peripherals reporting unit below its
carrying value.
• Terminal value assumptions. A hypothetical percentage decrease of 110% in the terminal value, holding
all other assumptions constant, would not have decreased the fair value of the peripherals reporting unit
below its carrying value.
Video Conferencing
Key assumptions used in the Step 1 income approach analyses for our video conferencing reporting unit
also included the appropriate discount rates, CAGR during the forecast period, and long-term growth rates for
purposes of determining a terminal value at the end of the discrete forecast period. Both the income and market
approaches arrived at estimated fair values within a relatively close range, which supported the reasonableness
of each assessment. We proceeded with a Step 2 assessment because the estimated fair value of our video
conferencing reporting unit was less than its carrying value. The Step 2 test required us to fair value all assets
and liabilities of our video conferencing reporting unit to determine the implied fair value of this reporting unit’s
goodwill. We were unable to fully complete the Step 2 analysis prior to filing of our Form 10-Q for the quarterly
period ended December 31, 2012 due to the complexities of determining the implied fair value of goodwill of our
video conferencing reporting unit. Based on our work performed during the third quarter of fiscal year 2013, we
initially recorded an estimated goodwill impairment charge of $211.0 million during that period. During the fourth
quarter of fiscal year 2013, we completed our annual goodwill impairment assessment and recorded an additional
$3.5 million in goodwill impairment charge related to our video conferencing reporting unit. The total goodwill
impairment charge of $214.5 million had no cash flow impact.
Applicable to Both Reporting Units
We continue to evaluate and monitor all key factors impacting the carrying value of our recorded goodwill, as
well as other long-lived assets. There are a number of uncertainties associated with the key assumptions described
above based primarily on the difficulty of predicting our revenues and profitability. Our revenues and profitability
are difficult to predict due to the nature of the markets in which we compete, fluctuating end-user demand, the
uncertainty of current and future global economic conditions, and for many other reasons, including, but not
limited to:
• Our revenues are impacted by end-user consumer demand and future global conditions, which could
fluctuate abruptly and significantly during periods of uncertain economic conditions or geographic
distress, as well as from shifts in consumer buying patterns.
• We must incur a large portion of our costs in advance of sales orders, because we must plan research and
production, order components, buy tooling equipment, and enter into development, sales and marketing,
and other operating commitments prior to obtaining firm commitments from our customers. This makes
it difficult for us to rapidly adjust our costs in response to a revenue shortfall.
ANNUAL REPORT
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