Qualcomm 2002 Annual Report Download - page 66

GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill represents the excess of purchase price and related costs over the value
assigned to the net tangible and identifiable intangible assets of businesses acquired.
Goodwill is amortized on a straight-line basis over its useful life, ranging from three
to four years. The Company will no longer record goodwill amortization starting in fis-
cal 2003 as a result of the adoption of Statement of Financial Accounting Standards
Board No. 142 (Note 1). Other intangible assets are amortized on a straight-line basis
over their useful lives, ranging from three to twenty years. Software development
costs are capitalized when a product’s technological feasibility has been established
through the date a product is available for general release to customers.
VALUATION OF LONG-LIVED AND INTANGIBLE ASSETS
The Company assesses potential impairments to its long-lived and intangible
assets when there is evidence that events or changes in circumstances indicate that
the carrying amount of an asset may not be recovered. An impairment loss is recog-
nized when the undiscounted cash flows expected to be generated by an asset (or
group of assets) is less than its carrying amount. Any required impairment loss is
measured as the amount by which the asset’s carrying value exceeds its fair value,
and is recorded as a reduction in the carrying value of the related asset and a charge
to operating results.
LITIGATION
The Company is currently involved in certain legal proceedings. The Company
estimates the range of liability related to pending litigation where the amount and
range of loss can be estimated. The Company records its best estimate of a loss when
the loss is considered probable. Where a liability is probable and there is a range of
estimated loss, the Company records the minimum estimated liability related to the
claim. As additional information becomes available, the Company assesses the poten-
tial liability related to the Company’s pending litigation and revises its estimates.
WARRANTY
Estimated future warranty obligations related to certain products are provided by
charges to operations in the period in which the related revenue is recognized.
STOCK-BASED COMPENSATION
The Company measures compensation expense for its stock-based employee
compensation using the intrinsic value method and provides pro forma disclosures of
net income and net earnings per common share as if the fair value method had been
applied in measuring compensation expense.
Equity instruments issued to non-employees for goods or services are accounted
for at fair value and are marked to market until service is complete or a performance
commitment date is reached.
FOREIGN CURRENCY
Foreign subsidiaries operating in a local currency environment use the local cur-
rency as the functional currency. Assets and liabilities are translated to United States
dollars at year-end exchange rates; revenues, expenses, gains and losses are trans-
lated at rates of exchange that approximate the rates in effect at the transaction date.
Resulting remeasurement gains or losses are recognized as a component of other
comprehensive income. The functional currency of the Company’s foreign investees
that do not use local currencies is the United States dollar. Where the United States
dollar is the functional currency, the monetary assets and liabilities are translated
into United States dollars at the exchange rate in effect at the balance sheet date.
Revenues, expenses, gains and losses associated with the monetary assets and lia-
bilities are translated at the rates of exchange that approximate the rates in effect at
the transaction date. Non-monetary assets and liabilities and related elements of
expense, gains and losses are translated at historical rates. Resulting remeasure-
ment gains or losses of these foreign investees are recognized in the statements of
operations.
During fiscal 2002, net foreign currency transaction losses included in the
Company’s statements of operations were $11 million. During fiscal 2001 and 2000,
net foreign currency transaction gains and losses included in the Company’s state-
ments of operations were not material.
COMPREHENSIVE INCOME
Comprehensive income (loss) is defined as the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources, including foreign currency translation adjustments and
unrealized gains and losses on marketable securities. The Company presents other
comprehensive income (loss) in its consolidated statements of stockholders’ equity.
The reclassification adjustment for other-than-temporary losses on marketable
securities results from the recognition of unrealized losses in the statement of oper-
ations resulting from declines in the market prices of those securities deemed to be
other than temporary. The reclassification adjustment for net realized losses (gains)
results from the recognition of the net realized losses or gains in the statement of
operations when the marketable securities are sold. The reclassification adjustment
for losses included in the accounting change results from the recognition of unreal-
ized losses attributable to derivative instruments as of the beginning of fiscal 2001 in
the statement of operations as a result of the implementation of FAS 133. Unrealized
losses on certain derivative instruments subject to FAS 133 were previously recorded
as a component of other comprehensive income (loss).
Components of accumulated other comprehensive loss consisted of the following
(in thousands):
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued