Radio Shack 2009 Annual Report Download - page 62

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Goodwill and Intangible Assets: Goodwill represents the excess of the purchase price over the fair
value of net assets acquired. Goodwill and intangible assets with indefinite useful lives are reviewed at least
annually for impairment (and in interim periods if certain events occur indicating that the carrying value of
goodwill and intangible assets may be impaired). We estimate fair values utilizing valuation methods such
as discounted cash flows. We have elected the fourth quarter to complete our annual goodwill impairment
test. As a result of the fourth quarter impairment analyses, we determined that no impairment charges are
required. The changes in the carrying amount of goodwill by segment were as follows for the years ended
December 31, 2009 and 2008:
(In millions)
U.S.
RadioShack
Stores Kiosks Other Total
Balances at December 31, 2007
Goodwill $ 2.4 $ 18.6 $ 2.0 $ 23.0
Accumulated impairment losses -- (18.6) (1.5) (20.1)
2.4 -- 0.5 2.9
Dealer conversions 0.4 -- -- 0.4
Acquisition of RadioShack de Mexico -- -- 35.2 35.2
Foreign currency translation adjustment -- -- (1.8) (1.8)
Balances at December 31, 2008
Goodwill 2.8 18.6 35.4 56.8
Accumulated impairment losses -- (18.6) (1.5) (20.1)
2.8 -- 33.9 36.7
Purchase accounting adjustments
related to acquisition of RadioShack
de Mexico -- -- 0.3 0.3
Foreign currency translation adjustment -- -- 1.9 1.9
Balances at December 31, 2009
Goodwill 2.8 18.6 37.6 59.0
Accumulated impairment losses -- (18.6) (1.5) (20.1)
$ 2.8 $ -- $ 36.1 $ 38.9
Self-Insurance: We are self-insured for certain claims relating to workers’ compensation, automobile,
property, employee health-care, and general and product liability claims, although we obtain third-party
insurance coverage to limit our exposure to these claims. We estimate our self-insured liabilities using
historical claims experience and actuarial assumptions followed in the insurance industry. Although we
believe we have the ability to reasonably estimate losses related to claims, it is possible that actual
results could differ from recorded self-insurance liabilities.
Income Taxes: Income taxes are accounted for using the asset and liability method. Deferred taxes are
recognized for the tax consequences of temporary differences by applying enacted statutory tax rates
applicable to future years to differences between the financial statement carrying amounts and the tax
bases of existing assets and liabilities. The effect on deferred taxes of a change in tax rates is recognized in
income in the period that includes the enactment date. In addition, we recognize future tax benefits to the
extent that such benefits are more likely than not to be realized. Income tax expense includes U.S. and
international income taxes, plus the provision for U.S. taxes on undistributed earnings of international
subsidiaries not deemed to be permanently invested.
Revenue Recognition: Our revenue is derived principally from the sale of name brand and private brand
products and services to consumers. Revenue is recognized, net of an estimate for customer refunds and
product returns, when persuasive evidence of an arrangement exists, delivery has occurred or services
have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured.
Certain products, such as wireless telephone handsets, require the customer to use the services of a
third-party service provider. The third-party service provider pays us an upfront commission for obtaining
a new customer and, in some cases, a monthly recurring residual amount based upon the ongoing