Avid 2008 Annual Report Download - page 34

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and amortization expense associated with assets held-for-sale. As discussed in Note G to our Consolidated Financial
Statements in Item 8, we completed the sales of the Softimage 3D animation and PCTV product lines in the fourth
quarter of 2008. PCTV inventory valued at $7.5 million was classified as held-for-sale and included in “other current
assets” in our consolidated balance sheet as of December 31, 2008.
When we measure the gain (loss) on sale of a disposal group that is part of a reporting unit, we determine whether a
portion of the goodwill of the reporting unit should be allocated to the disposal group if it constitutes a business, under
the guidance of EITF Issue 98-3, Determining Whether a Nonmonetary Transaction Involves Receipt of Productive
Assets or of a Business. If the disposal group is considered a business, the goodwill of the reporting unit is allocated
based on the relative fair values of the disposal group and the portion of the reporting unit remaining. In the fourth
quarter of 2008, we determined that the Softimage 3D animation product line constituted a business; therefore, the gain
on sale of this business includes an allocation of $15.8 million of goodwill from the Professional Video reporting unit.
Even though it was determined that the Softimage 3D animation product line constituted a business, we concluded that
this business did not represent a component of our company that would require the presentation of the divestiture as a
discontinued operation. We made this determination based on the fact that the Softimage product line does not have
operations or cash flows that are clearly distinguishable and largely independent from the rest of the Professional Video
reporting unit. In the fourth quarter of 2008, we determined that the PCTV product line was not a business and,
therefore, should not be reported as a discontinued operation based on the fact that the asset group sold would not be
able to continue to conduct normal, self-sustaining operations.
Fair Value Measurements
In September 2006, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting
Standards, or SFAS, No. 157, Fair Value Measurements, which defines fair value, establishes a framework for
measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair
value measurements. SFAS No. 157 does not require any new fair value measurements, but its provisions apply to all
other accounting pronouncements that require or permit fair value measurement. SFAS No. 157 was effective for our
fiscal year beginning January 1, 2008 and for interim periods within that year. In February 2008, the FASB issued
FASB Staff Position, or FSP, No. 157-2, Effective Date of FASB Statement No. 157, which delayed for one year the
effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized
or disclosed at fair value in the financial statements on a recurring basis (at least annually). As required, we adopted
SFAS No. 157 for our financial assets on January 1, 2008. Adoption did not have a material impact on our financial
position or results of operations. In accordance with FSP No. 157-2, we deferred the application of the provisions of
SFAS No. 157 to certain nonfinancial assets and liabilities including reporting units measured at fair value in goodwill
impairment tests, nonfinancial assets and liabilities measured at fair value for impairment assessments and nonfinancial
liabilities for restructuring activities. The adoption of SFAS No. 157, as it pertains to non-financial assets and liabilities,
is not expected to have a material impact on our financial position or results of operations.
SFAS No. 157 establishes a fair value hierarchy that requires the use of observable market data, when available, and
prioritizes the inputs to valuation techniques used to measure fair value in the following categories:
• Level 1 – Quoted unadjusted prices for identical instruments in active markets.
• Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar
instruments in markets that are not active and model-derived valuations in which all observable inputs and
significant value drivers are observable in active markets.
• Level 3 – Model derived valuations in which one or more significant inputs or significant value drivers are
unobservable, including assumptions developed by us.
On a recurring basis, we measure certain financial assets and liabilities at fair value, including our cash equivalents and
investment instruments. All of our cash equivalents and investment instruments are classified as either Level 1 or Level
2 in the fair value hierarchy as of December 31, 2008. Instruments valued using quoted market prices in active markets
and classified as Level 1 are primarily money market securities. Investments valued based on other observable inputs
and classified as Level 2 include commercial paper, certificates of deposit, asset-backed obligations, discount notes, and
corporate and agency bonds. Our foreign currency contracts are executed in the over-the-counter retail market with