Motorola 2012 Annual Report Download - page 67

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compensation cost for these share-based awards is generally measured based on the fair value of the awards, as of the date that
the share-based awards are issued and adjusted to the estimated number of awards that are expected to vest. The fair values of
stock options and stock appreciation rights are generally determined using a Black-Scholes option pricing model which
incorporates assumptions about expected volatility, risk free rate, dividend yield, and expected life. Compensation cost for
share-based awards is recognized on a straight-line basis over the vesting period.
Retirement Benefits: The Company records annual expenses relating to its pension benefit and postretirement plans
based on calculations which include various actuarial assumptions, including discount rates, assumed asset rates of return,
compensation increases, turnover rates and health care cost trend rates. The Company reviews its actuarial assumptions on an
annual basis and makes modifications to the assumptions based on current rates and trends. The effects of the gains, losses, and
prior service costs and credits are amortized either over the average service life or over the average remaining lifetime of the
participant, depending on the number of active employees in the plan. The funding status, or projected benefit obligation less
plan assets, for each plan, is reflected in the Company’s consolidated balance sheets using a December 31 measurement date.
Advertising Expense: Advertising expenses, which are the external costs of marketing the Company’s products, are
expensed as incurred. Advertising expenses were $95 million, $98 million and $109 million for the years ended December 31,
2012, 2011 and 2010, respectively.
Use of Estimates: The preparation of the accompanying consolidated financial statements in conformity with
accounting principles generally accepted in the U.S. requires management to make estimates and assumptions about future
events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about
contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of
accounts receivable and long term receivables, inventories, Sigma Fund, investments, goodwill, intangible and other long-lived
assets, legal contingencies, guarantee obligations, indemnifications, and assumptions used in the calculation of income taxes,
retirement and other post-employment benefits and allowances for discounts, price protection, product returns, and customer
incentives, among others. These estimates and assumptions are based on management’s best estimates and judgment.
Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors,
including the current economic environment, which management believes to be reasonable under the circumstances. The
Company adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity,
foreign currency, energy markets and declines in consumer spending have combined to increase the uncertainty inherent in such
estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ
significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment
will be reflected in the financial statements in future periods.
2. Discontinued Operations
On January 1, 2012, the Company completed a series of transactions which resulted in exiting the amateur, marine and
airband radio businesses. The operating results of the amateur, marine and airband radio businesses, formerly included as part
of the Government segment, are reported as discontinued operations in the consolidated statements of operations for all periods
presented.
On October 28, 2011, the Company completed the sale of its wireless broadband businesses. During the year ended
December 31, 2011, the Company recorded a pre-tax gain related to the sale of the wireless broadband businesses of $40
million, net of closing costs, in its results from discontinued operations. The operating results of the wireless broadband
businesses, formerly included as part of the Enterprise segment, are reported as discontinued operations in the statements of
operations for all periods presented.
On April 29, 2011, the Company completed the sale of certain assets and liabilities of its Networks business to Nokia
Siemens Networks ("NSN"). The results of operations of the portions of the Networks business sold are reported as
discontinued operations for all periods presented. Based on the terms and conditions of the Networks business divestiture, the
sale was subject to a purchase price adjustment that was contingent upon the review of final assets and liabilities transferred to
NSN and was based on the change in net assets from the original agreed upon sale date. During the year ended December 31,
2011, the Company received approximately $1.0 billion of net proceeds and recorded a pre-tax gain related to the completion of
this sale of $434 million, net of closing costs, and an agreed upon purchase price adjustment of $120 million in its results from
discontinued operations.
On January 4, 2011, the distribution of Motorola Mobility was completed. The stockholders of record as of the close of
business on December 21, 2010 received one (1) share of Motorola Mobility common stock for each eight (8) shares of the
Company’s common stock held as of the record date. Immediately following the distribution, the Company changed its name to
Motorola Solutions, Inc. The distribution was structured to be tax-free to Motorola Solutions and its stockholders for U.S. tax
purposes (other than with respect to any cash received in lieu of fractional shares). The historical financial results of Motorola
Mobility are reflected in the Company’s consolidated financial statements and footnotes as discontinued operations for all
periods presented.