Western Digital 1995 Annual Report Download - page 22

    .
Depreciation and Amortization
The cost of property and equipment is depreciated over the estimated useful lives
of the respective assets. Depreciation is computed on a straight-line basis for finan-
cial reporting purposes and on an accelerated basis for income tax purposes.
Leasehold improvements are amortized over the lesser of the estimated useful lives
of the assets or the related lease terms. Goodwill and purchased technology, the
recoverability of which are subject to periodic evaluation, are capitalized at cost
and amortized on a straight-line basis over their estimated lives which are fifteen
and five to fifteen years, respectively.
Revenue Recognition
The Company recognizes revenue at time of shipment and records a reserve for
price adjustments and estimated sales returns. The Company has agreements with
its resellers to provide price protection for inventories held by the resellers at the
time of published list price reductions and, under certain circumstances, stock
rotation for slow-moving items. These agreements may be terminated upon written
notice by either party. In the event of termination, the Company may be obligated
to repurchase a certain portion of the resellers’inventory.
Income Tax es
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109 (“SFAS 109”), “Accounting for Income
Taxes.’’SFAS 109 generally provides that deferred tax assets and liabilities be recog-
nized for temporary differences between the financial reporting basis and the tax
basis of the Company’s assets and liabilities and expected benefits of utilizing net
operating loss (“NOL”) carryforwards. The Company records a valuation
allowance for certain temporary differences for which it is not certain whether the
Company will receive future tax benefits. The impact on deferred taxes of changes
in tax rates and laws, if any, are applied to the years during which temporary dif-
ferences are expected to be settled and reflected in the financial statements in the
period of enactment.
Per Share Information
Primary earnings per share amounts are based upon the weighted average number
of shares and dilutive common stock equivalents for each period presented. Fully
diluted earnings per share additionally reflects dilutive shares assumed to be issued
upon conversion of the Company’s convertible subordinated debentures.
Loss per share amounts are based upon the weighted average number of
shares of common stock outstanding during the period. Common stock equiva-
lents are not included in the computation because their effect would be antidilutive.
Reclassifications
Certain prior years’amounts have been reclassified to conform to the current year
presentation.