American Home Shield 2010 Annual Report Download - page 73

Table of Contents
Notes to the Consolidated Financial Statements (Continued)
Note 1. Significant Accounting Policies (Continued)
revenues are recognized in later quarters. On an interim basis, TruGreen LawnCare defers these incremental selling expenses, pre-season advertising costs and
annual repairs and maintenance procedures that are performed primarily in the first quarter. These costs are deferred and recognized in proportion to the
contract revenue over the production season and are not deferred beyond the calendar year-end. Other business segments of the Company also defer, on an
interim basis, advertising costs incurred early in the year. These pre-season costs are deferred and recognized approximately in proportion to revenue over the
balance of the year and are not deferred beyond the calendar year-end.
Advertising: As discussed in the "Interim Reporting" note above, certain pre-season advertising costs are deferred and recognized approximately in
proportion to the revenue over the year. Certain other advertising costs are expensed when the advertising occurs. The cost of direct-response advertising at
Terminix and TruGreen LawnCare, consisting primarily of direct-mail promotions, is capitalized and amortized over its expected period of future benefits.
Advertising expense for the years ended December 31, 2010, 2009 and 2008 was $152.7 million, $150.0 million and $151.3 million, respectively.
Inventory: Inventories are recorded at the lower of cost (primarily on a weighted average cost basis) or market. The Company's inventory primarily
consists of finished goods to be used on the customers' premises or sold to franchisees.
Property and Equipment, Intangible Assets and Goodwill:
Property and equipment consist of the following:
Balance as of
December 31,
Estimated
Useful
Lives
(Years)
(In millions) 2010 2009
Land $ 24.3 $ 12.9 N/A
Buildings and improvements 81.4 54.2 10 - 40
Technology and communications 162.5 125.8 3 - 7
Machinery, production equipment and vehicles 198.8 134.5 3 - 9
Office equipment, furniture and fixtures 19.2 17.7 5 - 7
486.2 345.1
Less accumulated depreciation (196.8) (133.0)
Net property and equipment $ 289.4 $ 212.1
Depreciation of property and equipment, including depreciation of assets held under capital leases, was $69.0 million, $64.4 million and $55.6 million
for the years ended December 31, 2010, 2009 and 2008, respectively.
Intangible assets consisted primarily of goodwill in the amount of $3,125.3 million and $3,119.8 million, indefinite-lived trade names in the amount of
$2,375.2 million and $2,380.1 million, and other intangible assets in the amount of $288.2 million and $407.1 million at December 31, 2010 and 2009,
respectively.
Fixed assets and intangible assets with finite lives are depreciated and amortized on a straight-line basis over their estimated useful lives. These lives are
based on the Company's
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