EMC 2007 Annual Report Download - page 43

judgments on any of these factors could materially impact the value of the asset. The valuation of goodwill is based upon a discounted cash flow analysis
performed at the reporting unit level. The analysis factors in estimated revenue and expense growth rates. The estimates are based upon our historical
experience and projections of future activity, factoring in customer demand, changes in technology and a cost structure necessary to achieve the related
revenues. Changes in judgments on any of these factors could materially impact the value of the asset.
Restructuring Charges
We recognized restructuring charges in 2007, 2006, 2005 and prior years. The restructuring charges include, among other items, estimated losses on the
sale of real estate, employee termination benefit costs, subletting of facilities and termination of various contracts. The amount of the actual obligations may
be different than our estimates due to various factors, including market conditions and negotiations with third parties. Should the actual amounts differ from
our estimates, the amount of the restructuring charges could be materially impacted.
Accounting for Income Taxes
As part of the process of preparing our financial statements, we are required to estimate our provision for income taxes in each of the jurisdictions in
which we operate. This process involves estimating our actual current tax exposure, including assessing the risks associated with tax audits, together with
assessing temporary differences resulting from the different treatment of items for tax and accounting purposes. These differences result in deferred tax assets
and liabilities, which are included within our balance sheet. We assess the likelihood that our deferred tax assets will be recovered from future taxable income
and to the extent we believe that recovery is more likely than not, do not establish a valuation allowance. In the event that actual results differ from these
estimates, our provision for income taxes could be materially impacted.
Accounting for Stock-based Compensation
On January 1, 2006, we adopted FAS No. 123R, which requires the recognition of compensation expense for all share-based payment awards made to
employees and directors based upon the awards' estimated grant date fair value. Previously, we elected to account for these share-based payment awards under
APB No. 25 and elected to only disclose the impact of expensing the fair value of stock options in the notes to the Consolidated Financial Statements. FAS
No. 123R requires management to make estimates and assumptions to determine the underlying value of stock options and restricted stock awards, including
the vesting or accelerated vesting for restricted stock awards containing performance-based vesting features, the expected life of stock options and an estimate
of future forfeitures. Changes to these estimates and assumptions may have a significant impact on the value of stock-based compensation expense
recognized, which could have a material impact on our financial statements.
New Accounting Pronouncements
In September 2006, the FASB issued FAS No. 157, "Fair Value Measurements" ("FAS No. 157"), which addresses how companies should measure fair
value when they are required to use a fair value measure for recognition or disclosure purposes under generally accepted accounting principles. FAS No. 157
defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value
measurements. FAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and should be applied
prospectively, except in the case of a limited number of financial instruments that require retrospective application. In February 2008, the FASB deferred the
implementation of FAS No. 157 for certain non-financial assets and liabilities for fiscal years beginning after November 15, 2008. We are currently evaluating
the potential impact of FAS No. 157 on our financial position and results of operations.
In February 2007, the FASB issued FAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of
FAS 115" ("FAS No. 159"). The new statement allows entities to choose, at specified election dates, to measure eligible financial assets and liabilities at fair
value that are not otherwise required to be measured at fair value. If a company elects the fair value option for an eligible item, changes in that item's fair
value in subsequent reporting periods must be recognized in current earnings. FAS No.159 is effective for fiscal years beginning after November 15, 2007.
We are currently evaluating the potential impact of FAS No. 159 on our financial position and results of operations.
In December 2007, the FASB issued FAS No. 141 (revised 2007), "Business Combinations" ("FAS No. 141R"). This statement establishes principles
and requirements for how the acquirer in a business combination (i) recognizes and measure in its financial statements the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree, (ii) recognizes and measures the goodwill acquired in the business combination or a gain
from a bargain purchase, and
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