Avnet 2015 Annual Report Download - page 51

TableofContents
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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softwareobtainedordevelopedforinternaluse.Softwareobtainedforinternalusehasgenerallybeenenterprise-levelbusiness
operations, logistics and finance software that is customized to meet the Company’s specific operational requirements. The
Companybeginsdepreciation andamortization(“depreciation”) forproperty, plantandequipmentwhenanassetisbothinthe
locationandconditionforitsintendeduse.
Property,plant,andequipmentisdepreciatedusingthestraight-linemethodoveritsestimatedusefullives.Theestimated
usefullivesforproperty,plant,andequipmentaretypicallyasfollows:buildings—30years;machinery,fixturesandequipment
—2-10years;informationtechnologyhardwareandsoftware—2-10years;andleaseholdimprovements—overtheapplicable
minimumleasetermoreconomicusefullifeifshorter.
The Company amortizes intangible assets acquired in business combinations using the straight-line method over the
estimatedeconomicusefullivesoftheintangibleassetsfromthedateofacquisition,whichisgenerallybetween5-10years.
Long-lived assets impairment — Long-lived assets, including property, plant and equipment and intangible assets, are
reviewedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountofanassetgroupmay
notberecoverable.Forpurposesofrecognitionandmeasurementofanimpairmentloss,long-livedassetsaregroupedwithother
assetsandliabilitiesatthelowestlevelforwhichidentifiablecashflowsarelargelyindependentofthecashflowsofotherassets
andliabilities(“assetgroup”).Animpairmentisrecognizedwhentheestimatedundiscountedcashflowsexpectedtoresultfrom
theuseoftheassetgroupanditseventualdispositionislessthanitscarryingamount.Animpairmentismeasuredastheamount
by which an asset group’s carrying value exceeds its estimated fair value. The Company considers a long-lived asset to be
abandonedwhenithasceaseduseofsuchabandonedassetandiftheCompanyhasnointenttouseorrepurposetheassetinthe
future.TheCompanycontinuallyevaluates the carrying value and theremaining economic usefullife of long-lived assetsand
willadjustthecarryingvalueandremainingusefullifeifandwhenappropriate.
Goodwill — Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair value
assigned to the individual assets acquired and liabilities assumed. The Company does not amortize goodwill, but instead tests
goodwill for impairment at least annually in the fourth quarter and, if necessary, records any impairment resulting from such
goodwillimpairmenttestingasacomponentofoperatingexpenses.Impairmenttestingisperformedatthereportingunitlevel,
andthe Company has identified sixreporting units, defined aseach ofthethree regions (Americas, EMEA,andAsiaPacific)
withintheCompany’s two reportable segments(EMand TS). The Company willperform aninterim impairment test between
requiredannualtestsiffactsandcircumstancesindicatethatitismorelikelythannotthatthefairvalueofareportingunitthat
hasgoodwillislessthanitscarryingvalue.
Inperforming goodwill impairment testing, the Company may first make aqualitative assessment ofwhetheritismore-
likely-than-notthatareportingunit’sfairvalueislessthanitscarryingvalue.Ifthequalitativeassessmentindicatesitismore-
likely-than-not that a reporting unit’s fair value is not greater than its carrying value, the Company must perform a two-step
quantitativeimpairmenttest.TheCompanydefinesthefairvalueofareportingunitasthepricethatwouldbereceivedtosellthe
reportingunitasawholeinanorderlytransactionbetweenmarketparticipantsattheimpairmenttestdate.Todeterminethefair
value of a reporting unit, the Company primarily uses the income approach methodology of valuation, which includes the
discounted cash flow method, and the market approach methodology of valuation, which considers values of comparable
businessestoestimatethefairvalueoftheCompany’sreportingunits.
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