Danaher 2011 Annual Report Download - page 71

Table of Contents
The allowances for doubtful accounts represent management’s best estimate of the credit losses expected from the Company’s trade accounts, contract and
finance receivable portfolios. Determination of the allowances requires management to exercise judgment about the timing, frequency and severity of credit
losses that could materially affect the provision for credit losses and, therefore, net earnings. The Company regularly performs detailed reviews of its
portfolios to determine if an impairment has occurred and evaluates the collectability of receivables based on a combination of various financial and qualitative
factors that may affect customers’ ability to pay, including customers’ financial condition, collateral, debt-servicing ability, past payment experience and
credit bureau information. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations, a specific reserve
is recorded against amounts due to reduce the recognized receivable to the amount reasonably expected to be collected. Additions to the allowances for doubtful
accounts are charged to current period earnings; amounts determined to be uncollectible are charged directly against the allowances, while amounts recovered
on previously written-off accounts increase the allowances. If the financial condition of the Company’s customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional reserves would be required. The Company does not believe that accounts receivable represent
significant concentrations of credit risk because of the diversified portfolio of individual customers and geographical areas. The Company recorded $40
million, $47 million and $43 million in charges associated with doubtful accounts during 2011, 2010 and 2009, respectively.
Included in the Company’s trade accounts receivable and other long-term assets as of December 31, 2011 and 2010 are $133 million and $121 million of net
aggregate financing receivables, respectively. All financing receivables are evaluated collectively for impairment due to the homogeneous nature of the portfolio.
During 2011, the Company reclassified a portion of its allowance for doubtful accounts from current assets to non-current assets to more appropriately reflect
the expected realizability of the associated financing receivable within each relevant financial statement caption. The December 31, 2010 Consolidated Balance
Sheet has been reclassified to conform with the current year presentation. The reclassification did not have a material impact to the Company’s financial
statements as a whole, and did not have any impact on the covenants associated with the Company’s debt instruments or credit facilities.
Inventory Valuation—Inventories include the costs of material, labor and overhead. Domestic inventories are stated at the lower of cost or market primarily
using the first-in, first-out (“FIFO”) method with certain businesses applying the last-in, first-out method (“LIFO”) to value inventory. Inventories held outside
the United States are stated at the lower of cost or market primarily using the FIFO method.
Property, Plant and Equipment—Property, plant and equipment are carried at cost. The provision for depreciation has been computed principally by the
straight-line method based on the estimated useful lives of the depreciable assets as follows:
 
Buildings 30 years
Leased assets and leasehold improvements Amortized over the lesser of the economic life of
the asset or the term of the lease
Machinery and equipment 3 – 10 years
Customer-leased instruments 5 – 7 years
Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively.
Investments—Investments over which the Company has a significant influence but not a controlling interest, are accounted for using the equity method of
accounting. Equity investments are recorded at the amount of the Company’s initial investment and adjusted each period for the Company’s share of the
investee’s income or loss and dividends paid. All equity investments are periodically reviewed to determine if declines in fair value below cost basis are other-
than-temporary. Significant and sustained decreases in quoted market prices or a series of historic and projected operating losses by investees are strong
indicators of other-than-temporary declines. If the decline in fair value is determined to be other-than-temporary, an impairment loss is recorded and the
investment is written down to a new carrying value. Other investments relate to available-for-sale securities and are carried at market value, if readily
determinable, or at cost. Unrealized gains or losses on securities classified as available-for-sale are recorded in stockholders’ equity as a component of
accumulated other comprehensive income (loss).
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Source: DANAHER CORP /DE/, 10-K, February 24, 2012 Powered by Morningstar® Document Research℠
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