Medtronic 2014 Annual Report Download - page 78

Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
Certain of the Company’s investments in equity and other securities are long-term, strategic investments in companies that are
in varied stages of development. The Company accounts for these investments under the cost or the equity method of
accounting, as appropriate. These investments are included in other assets on the consolidated balance sheets. The valuation of
equity and other securities accounted for under the cost method considers all available financial information related to the
investee, including valuations based on recent third-party equity investments in the investee. If an unrealized loss for any
investment is considered to be other-than-temporary, the loss will be recognized in the consolidated statements of earnings in
the period the determination is made. Equity securities accounted for under the equity method are initially recorded at the
amount of the Company’s investment and adjusted each period for the Company’s share of the investee’s income or loss and
dividends paid. Equity securities accounted for under both the cost and equity methods are reviewed quarterly for changes in
circumstance or the occurrence of events that suggest the Company’s investment may not be recoverable. See Note 5 for
discussion of the gains and losses recognized on equity and other securities.
Accounts Receivable The Company grants credit to customers in the normal course of business, but generally does not
require collateral or any other security to support its receivables. The Company maintains an allowance for doubtful accounts
for potential credit losses. Uncollectible accounts are written off against the allowance when it is deemed that a customer
account is uncollectible.
Inventories Inventories are stated at the lower of cost or market, with cost determined on a first-in, first-out basis. Inventory
balances are as follows:
(in millions)
April 25,
2014
April 26,
2013
Finished goods $ 1,196 $ 1,174
Work in process 247 248
Raw materials 282 290
Total $ 1,725 $ 1,712
Property, Plant, and Equipment Property, plant, and equipment is stated at cost. Additions and improvements that extend
the lives of the assets are capitalized while expenditures for repairs and maintenance are expensed as incurred. Depreciation is
provided using the straight-line method over the estimated useful lives of the various assets. Property, plant, and equipment
balances and corresponding lives are as follows:
(in millions)
April 25,
2014
April 26,
2013
Lives
(in years)
Land and land improvements $ 152 $ 151 Up to 20
Buildings and leasehold improvements 1,565 1,532 Up to 40
Equipment 4,409 4,110 3-7
Construction in progress 313 359 —
Subtotal 6,439 6,152
Less: Accumulated depreciation (4,047) (3,662)
Property, plant, and equipment, net $ 2,392 $ 2,490
Depreciation expense of $501 million, $488 million, and $498 million was recognized in fiscal years 2014, 2013, and 2012,
respectively.
Goodwill Goodwill is the excess of the purchase price (consideration) over the estimated fair value of net assets, including in-
process research and development (IPR&D), of acquired businesses. In accordance with U.S. GAAP, goodwill is not amortized.
The Company assesses the impairment of goodwill annually in the third quarter and whenever an event occurs or circumstances
change that would indicate the carrying amount may be impaired. Impairment testing for goodwill is done at a reporting unit
level. An impairment loss is recognized when the carrying amount of the reporting unit’s net assets exceed the estimated fair
value of the reporting unit. The estimated fair value is determined using a discounted future cash flow analysis.
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