Texas Instruments 2015 Annual Report Download - page 41

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FORM 10-K
estimated useful lives of the improvements. We amortize acquisition-related intangibles on a straight-line basis over the estimated
economic life of the assets. Capitalized software licenses generally are amortized on a straight-line basis over the term of the license.
Fully depreciated or amortized assets are written off against accumulated depreciation or amortization.
Impairments of long-lived assets
We regularly review whether facts or circumstances exist that indicate the carrying values of property, plant and equipment or
other long-lived assets, including intangible assets, are impaired. We assess the recoverability of assets by comparing the projected
undiscounted net cash flows associated with those assets to their respective carrying amounts. Any impairment charge is based on the
excess of the carrying amount over the fair value of those assets. Fair value is determined by available market valuations, if applicable,
or by discounted cash flows.
Goodwill and indefinite-lived intangibles
Goodwill is not amortized but is reviewed for impairment annually or more frequently if certain impairment indicators arise. We perform
our annual goodwill impairment test as of October 1 for our reporting units, which compares the fair value for each reporting unit to its
associated carrying value, including goodwill. See Note 10 for additional information.
Foreign currency
The functional currency for our non-U.S. subsidiaries is the U.S. dollar. Accounts recorded in currencies other than the U.S. dollar are
remeasured into the functional currency. Current assets (except inventories), deferred income taxes, other assets, current liabilities and
long-term liabilities are remeasured at exchange rates in effect at the end of each reporting period. Property, plant and equipment with
associated depreciation and inventories are valued at historic exchange rates. Revenue and expense accounts other than depreciation
for each month are remeasured at the appropriate daily rate of exchange. Currency exchange gains and losses from remeasurement are
credited or charged to OI&E.
Derivatives and hedging
We use derivative financial instruments to manage exposure to foreign exchange risk. These instruments are primarily forward foreign
currency exchange contracts, which are used as economic hedges to reduce the earnings impact that exchange rate fluctuations
may have on our non-U.S. dollar net balance sheet exposures. Gains and losses from changes in the fair value of these forward
foreign currency exchange contracts are credited or charged to OI&E. We do not apply hedge accounting to our foreign currency
derivative instruments.
In connection with the issuance of long-term debt, we use financial derivatives such as treasury rate lock agreements that are
recognized in AOCI and amortized over the life of the related debt. The results of these derivative transactions have not been material.
We do not use derivatives for speculative or trading purposes.
Changes in accounting standards
In April 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-08, Presentation
of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures
of Disposals of Components of an Entity. This standard raises the threshold at which a disposal qualifies as a discontinued operation.
Under the new guidance, only a disposal representing a strategic shift in operations that has or will have a major effect on an entity’s
operations and financial results, such as a disposal of a major geographic area or a major line of business, should be presented as
discontinued operations. In addition, the new standard requires additional disclosures of both discontinued operations and certain other
disposals that do not meet the revised definition of a discontinued operation. This standard is effective for annual and interim reporting
periods beginning as of January 1, 2015. In the event that a future disposition meets the revised criteria, we expect that this standard
will have an impact on the presentation of our financial statements, and we will provide the appropriate disclosures at that time.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). This standard provides a single
set of guidelines for revenue recognition to be used across all industries and requires additional disclosures. This standard is effective
for annual and interim reporting periods beginning as of January 1, 2017. We are currently evaluating the potential impact of this
standard on our financial position and results of operations.
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure
of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This standard sets forth management’s responsibility to
evaluate, each reporting period, whether there is substantial doubt about an entity’s ability to continue as a going concern, and if so, to
provide related footnote disclosures. The standard is effective for annual and interim reporting periods ending after December 15, 2016.
We expect it will have no impact on our financial position and results of operations.