American Home Shield 2011 Annual Report Download - page 80

Table of Contents
Notes to the Consolidated Financial Statements (Continued)
Note 1. Significant Accounting Policies (Continued)
Interim Reporting: TruGreen has significant seasonality in its business. In the winter and spring, this business sells a series of lawn applications to
customers which are rendered primarily in March through October (the production season). This business incurs incremental selling expenses at the beginning
of the year that directly relate to successful sales for which the revenues are recognized in later quarters. On an interim basis, TruGreen 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, 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, 2011, 2010 and 2009 was $155.1 million, $152.5 million and $149.8 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) 2011 2010
Land $ 22.9 $ 22.9 N/A
Buildings and improvements 76.0 75.8 10 - 40
Technology and communications 207.0 152.4 3 - 7
Machinery, production equipment and vehicles 216.7 170.2 3 - 9
Office equipment, furniture and fixtures 19.2 18.7 5 - 7
541.8 440.0
Less accumulated depreciation (235.0) (173.1)
Net property and equipment $ 306.8 $ 266.9
Depreciation of property and equipment, including depreciation of assets held under capital leases, was $72.1 million, $60.6 million and $56.0 million
for the years ended December 31, 2011, 2010 and 2009, respectively.
Intangible assets consisted primarily of goodwill in the amount of $3.162 billion and $3.125 billion, indefinite-lived trade names in the amount of
$2.334 billion and $2.370 billion, and
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