SanDisk 2007 Annual Report Download - page 113

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Note 4: Goodwill and Other Intangible Assets
Goodwill. Goodwill balance is presented below (in thousands):
Balance at December 31, 2006 ............................................ $910,254
Goodwill adjustment .................................................. (69,384)
Balance at December 30, 2007 ............................................ $840,870
The goodwill adjustment for the year ended December 30, 2007 was primarily the result of purchase price
adjustments related to the msystems Ltd. (“msystems”) acquisition and to a lesser extent from the Matrix
Semiconductor, Inc. (“Matrix”) acquisition. See Note 14, “Business Acquisitions.”
In accordance with Statement of Financial Accounting Standards No. 142, (“SFAS 142”), Goodwill and Other
Intangible Assets, goodwill is not amortized, but instead is reviewed and tested for impairment at least annually and
whenever events or circumstances occur which indicate that goodwill might be impaired. Impairment of goodwill is
tested at the Company’s reporting unit level by comparing the carrying amount, including goodwill, to the fair
value. In performing the analysis, the Company uses the best information available, including reasonable and
supportable assumptions and projections. If the carrying amount of the Company exceeds its implied fair value,
goodwill is considered impaired and a second step is performed to measure the amount of impairment loss, if any.
The Company performs an annual goodwill impairment test with an effective date of the first day of the fourth fiscal
quarter.
Other Intangible Assets. Other intangible asset balances are presented below (in thousands):
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
December 30, 2007 December 31, 2006
Core technology ...... $311,801 $ (78,863) $232,938 $311,801 $(18,135) $293,666
Developed product
technology . ....... 12,900 (4,689) 8,211 12,900 (2,103) 10,797
Trademarks ......... 4,000 (4,000) — 4,000 (911) 3,089
Backlog ............ 5,000 (5,000) — 5,000 (1,139) 3,861
Supply agreement ..... 2,000 (2,000) — 2,000 (46) 1,954
Customer
relationships . . ..... 80,100 (23,907) 56,193 80,100 (6,008) 74,092
Acquisition-related
intangible assets .... 415,801 (118,459) 297,342 415,801 (28,342) 387,459
Technology licenses and
patents ........... 39,243 (14,562) 24,681 7,388 (5,769) 1,619
Total .............. $455,044 $(133,021) $322,023 $423,189 $(34,111) $389,078
Other intangible assets increased by $31.9 million in the fiscal year ended December 30, 2007, primarily due to
technology licenses and patents purchased from third parties. Amortization expense of intangible assets totaled
$98.9 million, $29.8 million and $2.7 million in fiscal years 2007, 2006 and 2005, respectively.
F-17
Notes to Consolidated Financial Statements — (Continued)