Motorola 2004 Annual Report Download - page 74

66 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Valuation of Investments and Long-Lived Assets
The Company assesses the impairment of investments and long-lived assets, which includes identiÑable
intangible assets, goodwill and property, plant and equipment, whenever events or changes in circumstances indicate
that the carrying value may not be recoverable. Factors considered important which could trigger an impairment
review include: (i) underperformance relative to expected historical or projected future operating results;
(ii) changes in the manner of use of the assets or the strategy for our overall business; (iii) negative industry or
economic trends; (iv) declines in stock price of an investment for a sustained period; and (v) our market
capitalization relative to net book value.
When the Company determines that the carrying value of intangible assets, goodwill and long-lived assets may
not be recoverable, an impairment charge is recorded. Impairment is generally measured based on a projected
discounted cash Öow method using a discount rate determined by our management to be commensurate with the
risk inherent in our current business model or prevailing market rates of investment securities, if available.
At December 31, 2004 and 2003, the net book values of these assets were as follows (in millions):
December 31 2004 2003
Property, plant and equipment $2,332 $2,473
Investments 3,241 3,302
Intangible assets 212 173
Goodwill 1,283 1,215
$7,068 $7,163
The Company did not record any Ñxed asset impairment charges in 2004, compared to charges of $10 million
in 2003. The 2003 charges primarily related to certain information technology equipment that was deemed to be
impaired.
The Company recorded impairment charges related to its investment portfolio of $36 million and $96 million
in 2004 and 2003, respectively, representing other-than-temporary declines in the value of the Company's
investment portfolio. The $96 million impairment charge in 2003 was primarily comprised of a $29 million charge
to write down to zero the Company's debt security holding in a European cable operator and other cost-based
investment writedowns. Additionally, the available-for-sale securities portfolio reÖected a net pre-tax unrealized gain
position of $2.3 billion at December 31, 2004, compared to a net pre-tax unrealized gain position of $2.4 billion at
December 31, 2003.
The Company performs a goodwill impairment test at the reporting unit level as of October 1 each year, or
more often should triggering events occur. In determining the fair value of the reporting unit, the Company utilizes
independent appraisal Ñrms who employ a combination of present value techniques and quoted market prices of
comparable businesses. During 2004, the Company determined that goodwill related to a sensor business within the
Other Products segment was impaired, resulting in a write-oÅ of goodwill totaling $125 million. During 2003, the
Company determined that the goodwill at the infrastructure reporting unit of the Broadband Communications
segment was impaired by $73 million.
The Company cannot predict the occurrence of future impairment-triggering events nor the impact such events
might have on these reported asset values. Such events may include strategic decisions made in response to the
economic conditions relative to product lines or operations and the impact of the economic environment on our
customer base.
Restructuring Activities
The Company records provisions for employee separation and exit costs when they are probable and estimable.
The Company maintains a formal Involuntary Severance Plan (""Severance Plan'') which permits Motorola to oÅer
to eligible employees severance beneÑts based on years of service in the event that employment is involuntarily
terminated as a result of a reduction-in-force or restructuring. Each separate reduction-in-force has qualiÑed for
severance beneÑts under the Severance Plan and, therefore, such beneÑts are accounted for in accordance with
SFAS 112, ""Accounting for Postemployment BeneÑts''. Under the provisions of SFAS 112, the Company recognizes
termination beneÑt formulas per the Severance Plan at the point in time that future settlement is probable and can
be reasonably estimated based on estimates prepared at the time a restructuring plan is approved by management.