EMC 2004 Annual Report Download - page 59

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Investments
Our investments are comprised primarily of debt securities that are classified as available-for-sale and recorded at their fair market value. Investments
with remaining maturities of less than twelve months from the balance sheet date are classified as short-term investments. Investments with remaining
maturities of more than twelve months from the balance sheet date are classified as long-term investments.
We also hold strategic equity investments. Strategic equity investments in publicly traded companies are classified as available-for-sale when there are no
restrictions on our ability to liquidate such securities. These investments are also carried at their market value. Strategic equity investments in privately-held
companies are carried at the lower of cost or net realizable value due to their illiquid nature. We review these investments to ascertain whether unrealized
losses are other than temporary.
Unrealized gains and temporary losses on investments classified as available-for-sale are included as a separate component of stockholders' equity, net of
any related tax effect. Realized gains and losses and other-than-temporary impairments on non-strategic investments are reflected in the statement of
operations in investment income. Realized gains and losses and other-than-temporary impairments on strategic investments are reflected in the statement of
operations in other expense, net. Investment activity is accounted for using the average cost, first-in, first-out and specific lot methods.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market, not in excess of net realizable value.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Assets under development are included in construction in progress. Depreciation commences upon
placing the asset in service and is recognized on a straight-line basis over the estimated useful lives of the assets, as follows:
Furniture and fixtures 5-7 years
Equipment 1-10 years
Improvements 5-25 years
Buildings 25-311/2 years
Upon retirement or disposition, the asset cost and related accumulated depreciation are removed with any gain or loss recognized in the statement of
operations. Repair and maintenance costs, including planned maintenance, are expensed as incurred.
Capitalized Software Development Costs
Research and development ("R&D") costs are expensed as incurred. R&D costs include salaries and benefits, consultants, facilities related costs and
travel. Software development costs incurred subsequent to establishing technological feasibility through the general release of the software products are
capitalized. Technological feasibility is demonstrated by the completion of a working model. Capitalized costs are amortized on a straight-line basis over
periods ranging from eighteen months to two years, which represent the products' estimated useful lives. The expense associated with the straight-line method
exceeds the amount of expense computed using the ratio of current period gross product revenues to total anticipated gross product revenues. Unamortized
software development costs were $219.0 million and $166.2 million at December 31, 2004 and 2003, respectively, and are included in other assets, net.
Amortization expense was $113.5 million, $90.9 million and $128.3 million in 2004, 2003 and 2002, respectively. Amounts capitalized were $166.3 million,
$113.4 million and $126.7 million in 2004, 2003 and 2002, respectively. The increase
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