EMC 2004 Annual Report Download - page 60

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
in the unamortized software development costs at December 31, 2004 compared to December 31, 2003 resulted from the acquisitions completed in 2003 and
2004. See Note B.
Long-lived Assets
We test goodwill for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the asset might be impaired.
Purchased intangible assets, other than goodwill are amortized over their estimated useful lives which range from one to twelve years. Intangible assets
include goodwill, purchased technology, trademarks and tradenames, customer relationships and customer lists, software licenses, patents and contracts.
Goodwill is carried at its historical cost.
We periodically review our long-lived assets and certain other intangibles, excluding goodwill, for impairment. We initiate reviews for impairment
whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of
these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted cash flows to the recorded value of the asset. If an
impairment is indicated, the asset is written down to its estimated fair value.
Advertising
Advertising production costs are expensed as incurred. Advertising expense was $11.7 million, $14.4 million and $10.1 million in 2004, 2003 and 2002,
respectively.
Legal Costs
Legal costs incurred in connection with loss contingencies are recognized when the costs are probable of occurrence and estimable.
Income Taxes
Deferred tax liabilities and assets are recognized for the expected future tax consequences of events that have been included in the financial statements or
tax returns. Deferred tax liabilities and assets are determined based on the difference between the tax bases of assets and liabilities and their reported amounts
using enacted tax rates in effect for the year in which the differences are expected to reverse. Tax credits are generally recognized as reductions of income tax
provisions in the year in which the credits arise. The measurement of deferred tax assets is reduced by a valuation allowance if, based upon available
evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
We do not provide for a U.S. income tax liability on undistributed earnings of our foreign subsidiaries. The earnings of non-U.S. subsidiaries, which
reflect full provision for non-U.S. income taxes, are currently indefinitely reinvested in non-U.S. operations or will be remitted substantially free of additional
tax.
Earnings (Loss) Per Share
Basic net income (loss) per share is computed using the weighted average number of shares of our common stock outstanding during the period. Diluted
net income (loss) per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period.
Common equivalent shares consist of stock options, unvested restricted stock and convertible debt.
Retirement/ Post Employment Benefits
Pension cost for our domestic defined benefit pension plan is funded to the extent that current pension cost is deductible for U.S. Federal tax purposes and
to comply with the Employee Retirement Income Security Act ("ERISA") and the General Agreement on Tariff and Trade Bureau (GATT) additional
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