Motorola 2010 Annual Report Download - page 128

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120
appropriate since it is often difficult to find other appropriate market participants that are similar to our reporting
units and it is the Company’s view that future discounted cash flows are more reflective of the value of the reporting
units.
Based on the results of the 2009 and 2010 annual assessments of the recoverability of goodwill, the fair values
of all reporting units exceeded their book values, indicating that there was no impairment of goodwill.
Based on the results of step one of the 2008 annual assessment of the recoverability of goodwill, the fair values
of the Broadband Home Solutions and the Access Networks reporting units exceeded their book values, indicating
that there was no impairment of goodwill at these reporting units. However, the fair value of the Enterprise
Mobility and Mobile Devices reporting units were below their respective book values, indicating a potential
impairment of goodwill and the requirement to perform step two of the analysis for the reporting unit. The
Company acquired the main components of the Enterprise Mobility reporting unit in 2007 at which time the book
and fair value of the reporting unit was the same. Because of this fact, the Enterprise Mobility reporting unit was
most likely to experience a decline in its fair value below its book value as a result of lower values in the overall
market due to the deteriorating macroeconomic environment and the market’s view of its near term impact on the
reporting unit. The decline in the fair value of the Mobile Devices reporting unit below its book value was a result
of the deteriorating macroeconomic environment, lower than expected revenues and cash flows as a result of the
decision to consolidate platforms announced in the fourth quarter of 2008, and the uncertainty around the
reporting unit’s future cash flow. For the year ended December 31, 2008, the Company determined that the
goodwill relating to the Enterprise Mobility and Mobile Devices reporting units was impaired, resulting in a charges
of $1.6 billion and $55 million, respectively, in the Enterprise Mobility Solutions and Mobile Devices reportable
segments.
15. Valuation and Qualifying Accounts
The following table presents the valuation and qualifying account activity for the years ended December 31,
2010, 2009 and 2008:
Balance at
January 1
Charged to
Earnings Used Adjustments
Balance at
December 31
2010
Reorganization of Businesses $122 $ 171 $ (153) $ (40) $100
Allowance for Doubtful Accounts 75 49 (11) (15) 98
Allowance for Losses on Long-term
Receivables 9 3 (2) (7) 3
Inventory Reserves 673 218 (263) (83) 545
Warranty Reserves 209 372 (301) (31) 249
Customer Reserves 321 1,131 (919) (160) 373
2009
Reorganization of Businesses $231 $ 356 $ (393) $ (72) $122
Allowance for Doubtful Accounts 114 27 (44) (22) 75
Allowance for Losses on Long-term
Receivables 7 6 — (4) 9
Inventory Reserves 622 358 (268) (39) 673
Warranty Reserves 268 278 (290) (47) 209
Customer Reserves 496 1,007 (1,021) (161) 321
2008
Reorganization of Businesses $187 $ 349 $ (260) $ (45) $231
Allowance for Doubtful Accounts 99 47 (18) (14) 114
Allowance for Losses on Long-term
Receivables 5 5 — (3) 7
Inventory Reserves 254 664 (326) 30 622
Warranty Reserves 383 414 (445) (84) 268
Customer Reserves 782 1,435 (1,347) (374) 496
Adjustments include translation adjustments.