Plantronics 2011 Annual Report Download - page 52

Goodwill and Intangibles
Goodwill and intangible assets with indefinite lives are not amortized. At least annually, in the fourth quarter of each fiscal year
or more frequently if indicators of impairment exist, management performs a review to determine if the carrying values of goodwill
and indefinite lived intangible assets are impaired.
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 our reporting unit level. We determine our reporting units by assessing whether discrete financial information is
available and if segment management regularly reviews the results of that component. Such impairment tests for goodwill include
comparing the fair value of the reporting unit with its carrying value, including goodwill. The estimate of the fair value of the
reporting unit is 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 our 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 we may be required to record an impairment charge, which would negatively impact our operating results.
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 lived
intangible asset exceeds management’s estimate of fair value, the asset may become impaired, and we may be required to record
an impairment charge which would negatively impact our operating results.
Purchased intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the
assets. Long-lived assets, including intangible assets, are reviewed for impairment 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. When
testing long-lived assets for recoverability, we also review depreciation and/or amortization estimates and methods to assess
whether the assets' remaining useful lives are still appropriate or should be revised.
RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted Pronouncements
In October 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2009-13,
Revenue Recognition (Topic 605)-Multiple Deliverable Revenue Arrangements (“ASU 2009-13”). ASU 2009-13 eliminates the
residual method of allocation and requires the relative selling price method when allocating deliverables of a multiple-deliverable
revenue arrangement. The determination of the selling price for each deliverable requires the use of a hierarchy designed to
maximize the use of available objective evidence including VSOE, TPE, or ESP.
In October 2009, the FASB also issued ASU No. 2009-14, Software (Topic 985)-Certain Revenue Arrangements That Include
Software Elements (“ASU 2009-14”). ASU 2009-14 excludes tangible products containing software and non-software components
that function together to deliver the product's essential functionality, from the scope of ASC 605-985, Software-Revenue
Recognition.
ASU 2009-13 and ASU 2009-14 are effective prospectively for revenue arrangements entered into or materially modified in fiscal
years beginning on or after June 15, 2010, and must be adopted in the same period using the same transition method. If adoption
is elected in a period other than the beginning of a fiscal year, the amendments in these standards must be applied retrospectively
to the beginning of the fiscal year. Full retrospective application of these amendments to prior fiscal years is optional. We
implemented both ASU 2009-13 and ASU 2009-14 in the second quarter of fiscal 2011 with retrospective application to the
beginning of fiscal 2011 for transactions that were initiated or materially modified during fiscal 2011. Implementation of these
ASUs did not have a material impact on reported net revenues as compared to net revenues under previous guidance as we do not
typically enter into multiple element arrangements. In addition, the new guidance did not change the units of accounting within
sales arrangements and the elimination of the residual method for the allocation of arrangement consideration had no material
impact on the amount and timing of reported net revenues. We do not believe that the effect of adopting these standards will have
a material impact on future financial periods.
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