Motorola 2011 Annual Report Download - page 113
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107
its carrying amount, the two-step goodwill impairment test is not required. This new guidance is effective for fiscal
years beginning after December 15, 2011 with early adoption permitted. The Company adopted this guidance as of
the fourth quarter of 2011.
Applying this new accounting guidance, the Company performed a qualitative assessment of each reporting unit
and determined that is was not more-likely-than-not that the fair value of each reporting unit was less than its
carrying amount. As a result, the two-step goodwill impairment test was not required in 2011.
2010 and 2009
The annual goodwill impairment tests for fiscal 2010 and fiscal 2009 were performed using the two step
goodwill impairment. In performing step one of the goodwill impairment test, the Company performed extensive
valuation analysis, utilizing both income and market-based approaches. The determination of the fair value of the
reporting units and other assets and liabilities within the reporting units required the Company to make significant
estimates and assumptions. These estimates and assumptions primarily included, but were not limited to, the
discount rate, terminal growth rate, earnings before depreciation and amortization, and capital expenditures
forecasts specific to each reporting unit. Due to the inherent uncertainty involved in making these estimates, actual
results could differ from those estimates.
The Company weighted the valuation of its reporting units at 75% based on the income approach and 25%
based on the market-based approach, consistent with prior periods. The Company believes that this weighting is
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.
15. Valuation and Qualifying Accounts
The following table presents the valuation and qualifying account activity for the years ended December 31,
2011, 2010 and 2009:
Balance at
January 1
Charged to
Earnings Used Adjustments
Balance at
December 31
2011
Allowance for Doubtful Accounts $ 49 $ 7 $ (4) $ (7) $ 45
Allowance for Losses on Long-term Receivables 1 10 (1) — 10
Inventory Reserves 157 37 (30) 7 171
Customer Reserves 117 580 (565) (7) 125
2010
Allowance for Doubtful Accounts 16 41 (2) (6) 49
Allowance for Losses on Long-term Receivables 7 — (6) — 1
Inventory Reserves 140 67 (34) (16) 157
Customer Reserves 97 427 (374) (33) 117
2009
Allowance for Doubtful Accounts 17 9 (3) (7) 16
Allowance for Losses on Long-term Receivables 3 5 (1) — 7
Inventory Reserves 150 51 (43) (18) 140
Customer Reserves 119 313 (323) (12) 97
Adjustments include translation adjustments.