CDW 2012 Annual Report Download - page 62

Table of Contents CDW CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Intangible assets with determinable lives are amortized on a straight-line basis over their respective estimated useful lives. The cost of
computer software developed or obtained for internal use is capitalized and amortized on a straight-line basis over the estimated useful
life of the software. These intangible assets are reviewed for impairment when indicators are present using undiscounted cash flows.
The Company uses the undiscounted cash flows, excluding interest charges, to assess the recoverability of the carrying value of such
assets. To the extent carrying value exceeds the undiscounted cash flows, an impairment loss is recorded based upon the excess of the
carrying value over fair value. In addition, each quarter the Company evaluates whether events and circumstances warrant a revision to
the remaining estimated useful life of each of these intangible assets. If the Company were to determine that a change to the remaining
estimated useful life of an intangible asset was necessary, then the remaining carrying amount of the intangible asset would be
amortized prospectively over that revised remaining useful life. During the years ended December 31, 2012, 2011 and 2010 , no
impairment existed with respect to the Company’s intangible assets with determinable lives and no significant changes to the remaining
useful lives were necessary. The following table shows estimated useful lives of definite-lived intangible assets:
Deferred Financing Costs
Deferred financing costs, such as underwriting, financial advisory, professional fees and other similar fees are capitalized and
recognized in interest expense over the estimated life of the related debt instrument using the effective interest method or straight-line
method, as applicable.
Derivatives
The Company has entered into interest rate cap and swap agreements for the purpose of economically hedging its exposure to
fluctuations in interest rates. These derivatives are recorded at fair value in the Company’s consolidated balance sheets.
For the Company’s interest rate swap agreements designated as cash flow hedges of interest rate risk, the effective portion of the
changes in fair value of the swaps is initially recorded as a component of accumulated other comprehensive loss in the Company’s
consolidated balance sheets and is subsequently reclassified into interest expense, net in the Company’s consolidated statements of
operations in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the
swaps is recognized directly in earnings. In the Company’s consolidated statements of cash flows, hedge activities are classified
according to the nature of the derivative.
For the Company’s interest rate swap and cap agreements not designated as cash flow hedges of interest rate risk, changes in fair value
of the derivatives are recorded directly to interest expense, net in the Company’s consolidated statements of operations.
Fair Value Measurements
Fair value is defined under GAAP as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. A fair value hierarchy has been established for valuation inputs to
prioritize the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each
fair value measurement is reported in one of the three levels which is determined by the lowest level input that is significant to the fair
value measurement in its entirety. These levels are:
Level 1 – observable inputs such as quoted prices for identical instruments traded in active markets.
Level 2 – inputs are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments
in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market
or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
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Classification Estimated
Useful Lives
Customer relationships 11 to 14 years
Trade name 20 years
Internally developed software 3 to 5 years
Other 1 to 10 years