Danaher 2011 Annual Report Download - page 72

Table of Contents
Other Assets—Other assets include principally, noncurrent trade receivables, non-current deferred tax assets, other investments, and capitalized costs
associated with obtaining financings which are amortized over the term of the related debt.
Fair Value of Financial Instruments—The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, available-
for-sale securities, obligations under trade accounts payable and short and long-term debt. Due to their short-term nature, the carrying values for cash and cash
equivalents, accounts receivable and trade accounts payable approximate fair value. Refer to Note 8 for the fair values of the Company’s available-for-sale
securities and other obligations.
Goodwill and Other Intangible Assets —Goodwill and other intangible assets result from the Company’s acquisition of existing businesses. In accordance with
accounting standards related to business combinations, goodwill amortization ceased effective January 1, 2002, however, amortization of certain identifiable
intangible assets, primarily comprising customer relationships and acquired technology, continues over the estimated useful life of the identified asset. Refer to
Notes 2 and 7 for additional information.
Revenue Recognition—As described above, the Company derives revenues primarily from the sale of test and measurement, environmental, life science and
diagnostic, dental and industrial products and services. For revenue related to a product or service to qualify for recognition, there must be persuasive evidence
of an arrangement with a customer, delivery must have occurred or the services must have been rendered, the price to the customer must be fixed and
determinable and collectability of the associated fee must be reasonably assured. The Company’s principal terms of sale are FOB Shipping Point and, as
such, the Company primarily records revenue for product sales upon shipment. Sales arrangements entered with delivery terms that are not FOB Shipping
Point are not recognized upon shipment and the delivery criteria for revenue recognition is evaluated based on the associated shipping terms. If any significant
obligations to the customer with respect to a sales transaction remains to be fulfilled following shipment, typically involving obligations relating to installation
and acceptance by the buyer, revenue recognition is deferred until such obligations have been fulfilled. Returns for products sold are estimated and recorded as
a reduction in reported revenues at the time of sale. Customer allowances and rebates, consisting primarily of volume discounts and other short-term incentive
programs, are recorded as a reduction in reported revenues at the time of sale because these allowances reflect a reduction in the purchase price. Product
returns, customer allowances and rebates are estimated based on historical experience and known trends. Revenue related to separately priced extended
warranty and product maintenance agreements is recognized as revenue over the term of the agreement.
Certain of the Company’s revenues relate to operating-type lease (“OTL”) payment arrangements. When a customer enters into an OTL agreement, instrument
lease revenue is recognized on a straight-line basis over the life of the lease, while the cost of the customer-leased instrument is recorded within property, plant
and equipment in the accompanying Consolidated Balance Sheet and depreciated over its estimated useful life. The depreciation expense is reflected in cost of
sales in the accompanying Consolidated Statement of Earnings. The OTLs are generally cancellable after the first two years. Certain of the Company’s lease
contracts are customized for larger customers and often result in complex terms and conditions that typically require significant judgment in applying the
criteria used to evaluate whether the arrangement should be considered an OTL or a “sales-type” lease. A sales-type lease would result in earlier recognition of
instrument revenue as compared to an OTL.
Effective January 1, 2011, the Company adopted, on a prospective basis, the provisions of recently updated accounting standards related to revenue
recognition associated with contractual arrangements involving multiple elements and contractual arrangements involving tangible products that include
software. As a result of adopting these standards, reported sales for the year ended December 31, 2011 were not significantly different than sales that would
have been reported under the previous accounting rules.
Consistent with the revenue recognition standards adopted January 1, 2011, revenues for contractual arrangements consisting of multiple elements (i.e.,
deliverables) are recognized for the separate elements when the product or services that are part of the multiple element arrangement have value on a stand-alone
basis and, in arrangements that include a general right of refund relative to the delivered element, performance of the undelivered element is considered probable
and substantially in the Company’s control. Certain subsidiaries of the Company have multiple element arrangements that include hardware, installation,
training, consulting and/or post contract support (“PCS”) revenues. Generally, these are delivered within the same reporting period, except PCS, for which
revenue is recognized over the service period. The Company allocates revenue to each element in the contractual arrangement based on a selling price hierarchy.
The selling price for a deliverable is based on its vendor-specific objective evidence (“VSOE”) if available, third-party evidence (“TPE”) if VSOE is not
available, or estimated selling price
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Source: DANAHER CORP /DE/, 10-K, February 24, 2012 Powered by Morningstar® Document Research℠
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