Motorola 2010 Annual Report Download - page 86

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Inventories: Inventories are valued at the lower of average cost (which approximates cost on a first-in,
first-out basis) or market (net realizable value or replacement cost).
Property, Plant and Equipment: Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation is recorded using straight-line and declining-balance methods, based on the estimated
useful lives of the assets (buildings and building equipment, 5-40 years; machinery and equipment, 2-10 years) and
commences once the assets are ready for their intended use.
Goodwill and Intangible Assets: Goodwill is not amortized, but instead is tested for impairment at least
annually. The goodwill impairment test is performed at the reporting unit level and is a two-step analysis. First, the
fair value of each reporting unit is compared to its book value. If the fair value of the reporting unit is less than its
book value, the Company performs a hypothetical purchase price allocation based on the reporting unit’s fair value
to determine the fair value of the reporting unit’s goodwill. Fair value is determined using a combination of present
value techniques and market prices of comparable businesses.
Intangible assets are generally amortized on a straight line basis over their respective estimated useful lives
ranging from one to 13 years. The Company has no intangible assets with indefinite useful lives.
Impairment of Long-Lived Assets: Long-lived assets, which include intangible assets, held and used by the
Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of assets may not be recoverable. The Company evaluates recoverability of assets to be held and used by
comparing the carrying amount of an asset (group) to future net undiscounted cash flows to be generated by the
asset (group). If an asset is considered to be impaired, the impairment to be recognized is equal to the amount by
which the carrying amount of the asset exceeds the asset’s fair value calculated using a discounted future cash flows
analysis or market comparables. Assets held for sale, if any, are reported at the lower of the carrying amount or fair
value less cost to sell.
Income Taxes: Deferred tax assets and liabilities are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in
the period that includes the enactment date.
Deferred tax assets are reduced by valuation allowances if, based on the consideration of all available evidence,
it is more likely than not that some portion of the deferred tax asset will not be realized. Significant weight is given
to evidence that can be objectively verified. The Company evaluates deferred income taxes on a quarterly basis to
determine if valuation allowances are required by considering available evidence. Deferred tax assets are realized by
having sufficient future taxable income to allow the related tax benefits to reduce taxes otherwise payable. The
sources of taxable income that may be available to realize the benefit of deferred tax assets are future reversals of
existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and
carryforwards, taxable income in carry-back years and tax planning strategies that are both prudent and feasible.
The Company recognizes the effect of income tax positions only if sustaining those positions is more likely than
not. Changes in recognition or measurement are reflected in the period in which a change in judgment occurs. The
Company records interest related to unrecognized tax benefits in Interest expense and penalties in Selling, general
and administrative expenses in the Company’s consolidated statements of operations.
Long-term Receivables: Long-term receivables include trade receivables where contractual terms of the note
agreement are greater than one year. Long-term receivables are considered impaired when management determines
collection of all amounts due according to the contractual terms of the note agreement, including principal and
interest, is no longer probable. Impaired long-term receivables are valued based on the present value of expected
future cash flows, discounted at the receivable’s effective rate of interest, or the fair value of the collateral if the
receivable is collateral dependent. Interest income and late fees on impaired long-term receivables are recognized
only when payments are received. Previously impaired long-term receivables are no longer considered impaired and
are reclassified to performing when they have performed under a workout or restructuring for four consecutive
quarters.