Motorola 2013 Annual Report Download - page 62

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is performed using the two-step goodwill test which may also include the optional qualitative assessment to determine whether
it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount prior to performing the two-step
goodwill impairment test. If this is the case, the two-step goodwill impairment test is required. If it is more-likely-than-not that
the fair value of a reporting unit is greater than its carrying amount, the two-step goodwill impairment test is not required.
If the two-step goodwill impairment test is performed, 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 amortized on a straight line basis over their respective estimated useful lives ranging from one to ten
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 (group) is considered to be
impaired, the impairment to be recognized is equal to the amount by which the carrying amount of the asset (group) exceeds
the asset's (group'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 all or 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 tax assets 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.
Sales and Use Taxes: The Company records taxes imposed on revenue-producing transactions, including sales, use,
value added and excise taxes, on a net basis with such taxes excluded from revenue.
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 interest rate, 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.
Foreign Currency: Certain of the Company’s non-U.S. operations use their respective local currency as their
functional currency. Those operations that do not have the U.S. dollar as their functional currency translate assets and liabilities
at current rates of exchange in effect at the balance sheet date and revenues and expenses using rates that approximate those in
effect during the period. The resulting translation adjustments are included as a component of Accumulated other
comprehensive loss in the Company’s consolidated balance sheets. For those operations that have the U.S. dollar as their
functional currency, transactions denominated in the local currency are measured in U.S. dollars using the current rates of
exchange for monetary assets and liabilities and historical rates of exchange for nonmonetary assets. Gains and losses from
remeasurement of monetary assets and liabilities are included in Other within Other income (expense) within the Company’s
consolidated statements of operations.