Black & Decker 2014 Annual Report Download - page 73

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PROPERTY, PLANT AND EQUIPMENT — The Company generally values property, plant and equipment (“PP&E”),
including capitalized software, at historical cost less accumulated depreciation and amortization. Costs related to maintenance
and repairs which do not prolong the asset's useful life are expensed as incurred. Depreciation and amortization are provided
using straight-line methods over the estimated useful lives of the assets as follows:
Useful Life
(Years)
Land improvements.................................................................................................................................... 10 —20
Buildings .................................................................................................................................................... 40
Machinery and equipment.......................................................................................................................... 3 — 15
Computer software ..................................................................................................................................... 3 — 5
Leasehold improvements are depreciated over the shorter of the estimated useful life or the term of the lease.
The Company reports depreciation and amortization of property, plant and equipment in cost of sales and selling, general and
administrative expenses based on the nature of the underlying assets. Depreciation and amortization related to the production of
inventory and delivery of services are recorded in cost of sales. Depreciation and amortization related to distribution center
activities, selling and support functions are reported in selling, general and administrative expenses.
The Company assesses its long-lived assets for impairment when indicators that the carrying amounts may not be recoverable
are present. In assessing long-lived assets for impairment, the Company groups its long-lived assets with other assets and
liabilities at the lowest level for which identifiable cash flows are generated (“asset group”) and estimates the undiscounted
future cash flows that are directly associated with, and expected to be generated from, the use of and eventual disposition of the
asset group. If the carrying value is greater than the undiscounted cash flows, an impairment loss must be determined and the
asset group is written down to fair value. The impairment loss is quantified by comparing the carrying amount of the asset
group to the estimated fair value, which is determined using weighted-average discounted cash flows that consider various
possible outcomes for the disposition of the asset group.
GOODWILL AND INTANGIBLE ASSETS — Goodwill represents costs in excess of fair values assigned to the underlying
net assets of acquired businesses. Intangible assets acquired are recorded at estimated fair value. Goodwill and intangible assets
deemed to have indefinite lives are not amortized, but are tested for impairment annually during the third quarter, and at any
time when events suggest an impairment more likely than not has occurred. Beginning in 2013, the Company adopted ASU
2011-08, “Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment.” ASU 2011-08 permits companies
to first assess qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less
than its carrying amount as a basis for determining whether it is necessary to perform the two-step quantitative goodwill
impairment test. In performing the qualitative assessment, the Company identifies and considers the significance of relevant
key factors, events, and circumstances that could affect the fair value of each reporting unit. These factors include external
factors such as macroeconomic, industry, and market conditions, as well as entity-specific factors, such as actual and planned
financial performance. The Company also assesses changes in each reporting unit's fair value and carrying amount since the
most recent date a fair value measurement was performed. Under the two-step quantitative goodwill impairment test, if
applicable, the fair value of the reporting unit is compared to its respective carrying amount including goodwill. To estimate
fair value of reporting units under the two-step quantitative approach, the Company uses assumptions about future cash flows
based on long-range strategic plans. This approach incorporates many assumptions including future growth rates, discount
factors and tax rates. In the event the carrying amount of a reporting unit exceeds its fair value, an impairment loss would be
recognized to the extent the carrying amount of the reporting unit's goodwill exceeded the implied fair value of the goodwill.
The qualitative assessments and quantitative analyses are completed separately with respect to the goodwill of each of the
Company’s reporting units.
Indefinite-lived intangible assets are tested for impairment by comparing the carrying amounts to the current fair market values,
usually determined by the estimated cost to lease the assets from third parties. Intangible assets with definite lives are
amortized over their estimated useful lives generally using an accelerated method. Under this accelerated method, intangible
assets are amortized reflecting the pattern over which the economic benefits of the intangible assets are consumed. Definite-
lived intangible assets are also evaluated for impairment when impairment indicators are present. If the carrying amount
exceeds the total undiscounted future cash flows, a discounted cash flow analysis is performed to determine the fair value of the
asset. If the carrying amount of the asset were to exceed the fair value, it would be written down to fair value. No significant
goodwill or other intangible asset impairments were recorded during 2014, 2013 or 2012, with the exception of the goodwill
and intangible assets related to the Security segment's Spain & Italy operations which were classified as held for sale in the
fourth quarter of 2014. Refer to Note T, Discontinued Operations, for further discussion.