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Table of Contents CDW CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, less accumulated depreciation. 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 its original
condition upon lease termination. The Company’s asset retirement liability was $0.5 million as of December 31, 2014 and 2013.
Equity Investments
If the Company is not required to consolidate its investment in another entity because it does not have control, the Company uses the
equity method if it (i) can exercise significant influence over the other entity and (ii) holds common stock of the other entity. Under the
equity method, investments are carried at cost, plus or minus the Company’s share of equity in the increases and decreases in the
investee’s net assets after the date of acquisition and adjustments for basis differences. The Company’s share of the net income or loss
of equity method investees is included in other income, net in the consolidated statements of operations.
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 to determine if it is more likely than not that the
reporting unit's goodwill is impaired 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
66
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