Danaher 2011 Annual Report Download - page 73

Table of Contents
(“ESP”) if neither VSOE or TPE is available. The Company considers relevant internal and external market factors in cases where the Company is required to
estimate selling prices. Allocation of the consideration is determined at the arrangements’ inception on the basis of each element’s relative selling price.
For transactions entered into prior to January 1, 2011, revenue for arrangements with multiple elements is 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, fair value of the separate elements exists (or in the case
of software related products, vendor specific objective evidence of fair value) 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. While determining fair value and
identifying separate elements requires judgment, generally the fair value of each separate element is identifiable as the elements are also sold unaccompanied by
other elements.
Shipping and Handling—Shipping and handling costs are included as a component of cost of sales. Revenue derived from shipping and handling costs billed
to customers are included in sales.
Research and Development—The Company conducts research and development activities for the purpose of developing new products, enhancing the
functionality, effectiveness, ease of use and reliability of the Company’s existing products and expanding the applications for which uses of the Company’s
products are appropriate. Research and development costs are expensed as incurred.
Income Taxes—The Company’s income tax expense represents the tax liability for the current year, the tax benefit or expense for the net change in deferred tax
liabilities and assets during the year, as well as reserves for unrecognized tax benefits and return to provision adjustments. Deferred tax liabilities and assets
are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted rates expected to be in effect during
the year in which the differences reverse. Deferred tax assets generally represent items that can be used as a tax deduction or credit in the Company’s tax return
in future years for which the tax benefit has already been reflected on the Company’s Consolidated Statement of Earnings. The Company establishes valuation
allowances for its deferred tax assets if it is more likely than not that some or all of the deferred tax asset will not be realized. Deferred tax liabilities generally
represent items that have already been taken as a deduction on the Company’s tax return but have not yet been recognized as an expense in the Company’s
Consolidated Statements of Earnings. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income tax expense in the
period that includes the enactment date. The Company accounts for uncertain tax positions by recognizing the financial statement effects of a tax position only
when, based upon the technical merits, it is “more-likely-than-not” that the position will be sustained upon examination. The Company recognizes potential
accrued interest and penalties associated with unrecognized tax positions in income tax expense. Refer to Note 15 for additional information.
Restructuring— The Company periodically initiates restructuring activities to appropriately position the Company’s cost base relative to prevailing economic
conditions and associated customer demand as well as in connection with certain acquisitions. Costs associated with restructuring actions can include one-
time termination benefits and related charges in addition to facility closure, contract termination and other related activities. The Company records the cost of
the restructuring activities when the associated liability is incurred. Refer to Note 18 for additional information.
Foreign Currency Translation—Exchange rate adjustments resulting from foreign currency transactions are recognized in net earnings, whereas effects
resulting from the translation of financial statements are reflected as a component of accumulated other comprehensive income (loss) within stockholders’
equity. Assets and liabilities of subsidiaries operating outside the United States with a functional currency other than U.S. dollars are translated into U.S.
dollars using year-end exchange rates. Net foreign currency transaction gains or losses were not material in any of the years presented.
Derivative Financial Instruments—The Company is neither a dealer nor a trader in derivative instruments. The Company has generally accepted the exposure
to exchange rate movements without using derivative instruments to manage this risk. The Company will periodically enter into foreign currency forward
contracts not exceeding twelve months to mitigate a portion of its foreign currency exchange risk. When utilized, the derivative instruments are recorded on the
balance sheet as either an asset or liability measured at fair value. To the extent the foreign currency forward contract qualifies as an effective hedge, changes in
fair value are recognized in other comprehensive income in stockholders’ equity. The Company’s use of foreign currency forward contracts during 2011 was
not significant and no contracts were outstanding at December 31, 2011. The Company is also party to a foreign currency swap
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Source: DANAHER CORP /DE/, 10-K, February 24, 2012 Powered by Morningstar® Document Research℠
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