Creative 2006 Annual Report Download - page 30

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30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Included฀in฀property฀and฀equipment฀are฀assets฀purchased฀under฀capital฀lease฀obligations฀with฀a฀cost฀and฀accumulated฀depreciation฀
of฀ approximately฀ $16.5฀ million฀ and฀ $16.0฀ million฀ for฀ fiscal฀ year฀ 2006,฀ and฀ $15.8฀ million฀ and฀ $12.8฀ million฀ for฀ fiscal฀ year฀ 2005,฀
respectively.
Depreciation฀charged฀to฀results฀of฀operations,฀including฀depreciation฀related฀to฀assets฀under฀capital฀leases,฀amounted฀to฀$21.0฀million,฀
$23.0฀million฀and฀$20.3฀million฀for฀fiscal฀years฀2006,฀2005฀and฀2004,฀respectively.
Creative฀routinely฀reviews฀the฀remaining฀estimated฀useful฀lives฀of฀their฀machinery฀and฀equipment฀to฀determine฀if฀such฀lives฀should฀be฀
adjusted฀due฀to฀the฀likelihood฀of฀technological฀obsolescence฀arising฀from฀changes฀in฀production฀techniques฀or฀in฀market฀demand฀for฀
the฀use฀of฀its฀machinery฀and฀equipment.
฀As of June 30
2006 2005
Other฀non-current฀assets:฀ ฀ ฀ ฀ ฀
฀Other฀intangible฀assets฀ ฀ $฀ 37,568฀ $฀ 37,668
฀ Accumulated฀impairment฀charges฀ ฀ ฀ (4,727)฀ ฀ (2,696)
฀ Accumulated฀amortization฀ ฀ ฀ (31,087)฀ ฀ (28,903)
฀ ฀
฀Other฀intangible฀assets,฀net฀ ฀ ฀ 1,754฀ ฀ 6,069
฀Goodwill฀฀ ฀ ฀ 91,976฀ ฀ 91,976
฀ Accumulated฀impairment฀charges฀ ฀ ฀ (91,976)฀ ฀ (62,529)
฀
฀Goodwill,฀net฀ ฀ ฀ –฀ ฀ 29,447
฀Other฀non-current฀assets฀ ฀ ฀ 9,917฀ ฀ 9,397
฀฀฀฀Total฀other฀non-current฀assets฀ ฀ $฀ 11,671฀ $฀ 44,913
Other฀intangible฀assets฀consist฀of฀mainly฀patents฀and฀trademarks.
Creative฀reviews฀goodwill฀and฀purchased฀intangible฀assets฀for฀impairment฀annually฀and฀whenever฀events฀or฀changes฀in฀circumstances฀
indicate฀the฀carrying฀value฀of฀an฀asset฀may฀not฀be฀recoverable฀in฀accordance฀with฀the฀Statement฀of฀Financial฀Accounting฀Standards฀
(“SFAS”)฀No.฀142,฀“Goodwill฀and฀Other฀Intangible฀Assets.”฀฀Creative฀typically฀performs฀its฀annual฀impairment฀assessment฀for฀goodwill฀
and฀other฀intangible฀assets฀in฀the฀fourth฀quarter฀of฀its฀fiscal฀year.฀฀However,฀during฀the฀third฀quarter฀of฀fiscal฀2006,฀Creative’s฀subsidiary,฀
3Dlabs,฀restructured฀its฀graphics฀business฀to฀focus฀its฀business฀on฀the฀portable฀handheld฀device฀market฀instead฀of฀the฀professional฀
workstation฀graphics฀market.฀฀As฀a฀result,฀the฀fair฀value฀of฀3Dlabs฀could฀no฀longer฀support฀the฀carrying฀value฀of฀the฀goodwill฀and฀other฀
intangible฀assets฀associated฀with฀the฀acquisition฀of฀3Dlabs฀in฀May฀2002,฀and฀accordingly,฀Creative฀recorded฀a฀goodwill฀impairment฀
charge฀of฀$29.4฀million฀and฀other฀intangible฀assets฀impairment฀charge฀of฀$2.0฀million฀in฀fiscal฀2006.฀฀
In฀fiscal฀year฀2005,฀an฀impairment฀test฀was฀performed฀on฀the฀goodwill฀and฀other฀intangible฀assets฀of฀3Dlabs฀and฀the฀conclusion฀of฀the฀
impairment฀review฀was฀that฀the฀fair฀value฀of฀3Dlabs฀could฀no฀longer฀support฀the฀carrying฀value฀of฀the฀goodwill฀and฀other฀intangible฀
assets฀associated฀with฀them.฀฀As฀a฀result,฀Creative฀recorded฀a฀goodwill฀impairment฀charge฀of฀$62.5฀million฀and฀other฀intangible฀assets฀
impairment฀charge฀of฀$2.7฀million฀in฀fiscal฀year฀2005.
Goodwill฀and฀other฀intangible฀assets฀fully฀amortized฀were฀excluded฀from฀the฀table฀above.฀฀Other฀intangible฀assets฀amortization฀expense฀
was฀$2.2฀million,฀$3.4฀million฀and฀$3.3฀million฀for฀fiscal฀years฀2006,฀2005฀and฀2004,฀and฀is฀estimated฀to฀be฀$1.2฀million฀and฀$0.3฀
million฀in฀fiscal฀years฀2007฀and฀2008,฀respectively,฀and฀$28,000฀for฀fiscal฀years฀2009฀to฀2011.
NOTE฀3฀–฀BALANCE฀SHEET฀DETAIL฀(in฀US$’000)฀(Cont’d)