Plantronics 2010 Annual Report Download - page 66

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Goodwill has been measured as the excess of the cost of acquisition over the amount assigned to tangible and identifiable intangible
assets acquired less liabilities assumed. The identification and measurement of goodwill impairment involves the estimation of fair
value at the Company’s reporting unit level. Such impairment tests for goodwill include comparing the fair value of a reporting unit
with its carrying value, including goodwill. The estimates of fair values of reporting units are based on the best information available
as of the date of the assessment which primarily incorporate management assumptions about expected future cash flows, discount
rates, overall market growth and the Company’s percentage of that market and growth rates in terminal values, estimated costs and
other factors, which utilize historical data, internal estimates, and, in some cases, outside data. If the carrying value of the reporting
unit exceeds management’s estimate of fair value, goodwill may become impaired, and the Company may be required to record an
impairment charge, which would negatively impact its operating results. (See Note 8)
The fair value measurement of purchased intangible assets with indefinite lives involves the estimation of the fair value which is based
on management assumptions about expected future cash flows, discount rates, growth rates, estimated costs and other factors which
utilize historical data, internal estimates, and, in some cases, outside data. If the carrying value of the indefinite useful life intangible
asset exceeds management’s estimate of fair value, the asset may become impaired, and the Company may be required to record an
impairment charge which would negatively impact its operating results.
Purchased intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the
assets, which range from three to ten years. Long-lived assets, including intangible assets, are reviewed for impairment in accordance
with the Property, Plant, and Equipment Topic of the FASB ASC whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. Such conditions may include an economic downturn or a change in the
assessment of future operations. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting
from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets that management
expects to hold and use is based on the amount that the carrying value of the asset exceeds its fair value. Long-lived assets to be
disposed of are reported at the lower of carrying amount or fair value less costs to sell. (See Note 9)
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is principally calculated
using the straight-line method over the estimated useful lives of the respective assets, which range from five to 30 years. Amortization
of leasehold improvements is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the
remaining lease term. Consolidated depreciation and amortization expense, including both continuing and discontinued operations,
for fiscal 2008, 2009 and 2010 was $20.3 million, $19.6 million and $16.4 million, respectively. In addition, the Company incurred
$5.2 million of accelerated depreciation in Fiscal 2010 related to Assets held for Sale on its Suzhou China facilities which was
included in Restructuring and other related charges on the Consolidated statement of earnings.
Costs associated with internal-use software are recorded in accordance with the Intangibles – Goodwill and Other Topic of the
ASC. Capitalized software costs are amortized on a straight-line basis over the estimated useful life. Unamortized capitalized
software costs were $9.6 million and $7.3 million at March 31, 2009 and 2010, respectively. The consolidated amounts amortized to
expense in both continuing and discontinued operations were $2.4 million, $3.1 million, and $3.0 million in fiscal 2008, 2009 and
2010, respectively.
Revenue Recognition
Revenue from sales of products to customers is recognized when the following criteria have been met:
· title and risk of ownership are transferred to customers;
· persuasive evidence of an arrangement exists;
· the price to the buyer is fixed or determinable; and
· collection is reasonably assured.
The Company assesses collectibility based on a customer’s credit quality as well as subjective factors and trends, including historical
experience, the age of any existing accounts receivable balances and geographic or country-specific risks and economic conditions
that may affect a customer’s ability to pay. The Company defers revenue but recognizes related cost of revenues if collectibility
cannot be reasonably assured. Plantronics recognizes revenue net of estimated product returns and expected payments to resellers for
customer programs including cooperative advertising, marketing development funds, volume rebates, and special pricing programs.