Motorola 2007 Annual Report Download - page 74

circumstances indicate that the carrying value may not be recoverable. The Company performs a goodwill
impairment test at the reporting unit level at least annually on October 1, or more often should triggering events
occur. Factors considered important that 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 price of an investment
for a sustained period, and (v) our market capitalization relative to net book value.
If it becomes probable that the Company will not collect all amounts in accordance with the contractual terms
of a debt security within the Sigma Fund, the Company considers the decline other-than-temporary and an
investment impairment is recorded.
When the Company determines that the carrying value of intangible assets and long-lived assets may not be
recoverable, an impairment charge is recorded. Impairment is generally measured based on a projected discounted
cash flow method using a discount rate determined by management to be commensurate with the risk inherent in
our current business model or prevailing market rates of investment securities, if available.
When performing a goodwill impairment test, the fair value of the reporting unit is determined using a
combination of present value techniques and quoted market prices of comparable businesses.
At December 31, 2007 and 2006, the net book values of these assets were as follows (in millions):
December 31 2007 2006
Sigma Fund $ 5,242 $12,204
Investments 837 895
Property, plant and equipment 2,480 2,267
Intangible assets 1,260 354
Goodwill 4,499 1,706
$14,318 $17,426
The Company recorded investment impairment charges of $62 million, $27 million and $25 million in 2007,
2006 and 2005, respectively, representing other-than-temporary declines in the value of the Company’s Sigma Fund
and investment portfolios. Additionally, the available-for-sale securities portfolio reflected an unrealized loss
position of $96 million and an unrealized gain position of $60 million at December 31, 2007 and 2006,
respectively.
The Company recorded fixed asset impairment charges of $50 million in 2007, and $15 million in both 2006
and 2005. The Company recorded intangible asset impairment charges of $81 million in 2007, compared to no
impairment charges in 2006 and 2005. No goodwill impairment charges were required in the periods presented.
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 maintains a formal Involuntary Severance Plan (the “Severance Plan”) which permits the
Company to offer eligible employees severance benefits based on years of service and employment grade level in
the event that employment is involuntarily terminated as a result of a reduction-in-force or restructuring. Each
separate reduction-in-force has qualified for severance benefits under the Severance Plan. The Company recognizes
termination benefits based on 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. Exit costs primarily consist of future minimum lease payments on vacated facilities. At each
reporting date, the Company evaluates its accruals for exit costs and employee separation costs to ensure the
accruals are still appropriate. In certain circumstances, accruals are no longer required because of efficiencies in
carrying out the plans or because employees previously identified for separation resigned from the Company and
did not receive severance or were redeployed due to circumstances not foreseen when the original plans were
initiated. The Company reverses accruals through the income statement line item where the original charges were
recorded when it is determined they are no longer required.
66 MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS