CDW 2012 Annual Report Download - page 61

Table of Contents CDW CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounts Receivable
Trade accounts receivable are recorded at the invoiced amount and typically do not bear interest. The Company provides allowances for
doubtful accounts related to accounts receivable for estimated losses resulting from the inability of its customers to make required
payments. The Company takes into consideration the overall quality of the receivable portfolio along with specifically identified
customer risks.
Merchandise Inventory
Inventory is valued at the lower of cost or market value. Cost is determined using a weighted-average cost method. Price protection is
recorded when earned as a reduction to the cost of inventory. The Company decreases the value of inventory for estimated obsolescence
equal to the difference between the cost of inventory and the estimated market value, based upon an aging analysis of the inventory on
hand, specifically known inventory-related risks, and assumptions about future demand and market conditions.
Miscellaneous Receivables
Miscellaneous receivables generally consist of amounts due from vendors. The Company receives incentives from vendors related to
cooperative advertising allowances, volume rebates, bid programs, price protection and other programs. These incentives generally
relate to written vendor agreements with specified performance requirements and are recorded as adjustments to cost of sales or
inventory, depending on the nature of the incentive.
Property and Equipment
Property and equipment are stated at cost. The Company calculates depreciation expense using the straight-line method over the
estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of their useful lives or the initial lease term.
Expenditures for major renewals and improvements that extend the useful life of property and equipment are capitalized. Expenditures
for maintenance and repairs are charged to expense as incurred. The following table shows estimated useful lives of property and
equipment:
The Company has asset retirement obligations associated with commitments to return property subject to operating leases to original
condition upon lease termination. The Company’s asset retirement liability was $0.5 million as of December 31, 2012 and 2011.
Goodwill and Other Intangible Assets
The Company is required to perform an evaluation of goodwill on an annual basis or more frequently if circumstances indicate a
potential impairment. The annual test for impairment is conducted as of December 1. The Company’s reporting units used to assess
potential goodwill impairment are the same as its operating segments. The Company has the option of performing a qualitative
assessment of a reporting unit's fair value from the last quantitative assessment or performing a quantitative assessment by comparing a
reporting unit's estimated fair value to its carrying amount. Under the quantitative assessment, testing for impairment of goodwill is a
two-step process. The first step compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying
amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of reporting unit goodwill with the
carrying amount of that goodwill to determine the amount of impairment loss. Fair value of a reporting unit is determined by using a
weighted combination of an income approach and a market approach, as this combination is considered the most indicative of the
Company’s fair value in an orderly transaction between market participants. This assessment uses significant accounting judgments,
estimates and assumptions. Any changes in the judgments, estimates or assumptions used could produce significantly different results.
During the years ended December 31, 2012, 2011 and 2010 , the Company recorded no goodwill impairment charges. See Note 4 for
more information on the Company’s evaluations of goodwill for impairment.
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Classification Estimated
Useful Lives
Machinery and equipment
5 to 10 years
Building and leasehold improvements
5 to 25 years
Computer and data processing equipment
3 to 5 years
Computer software
3 to 5 years
Furniture and fixtures
5 to 10 years