EMC 2008 Annual Report Download - page 63

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Buildings under development are included in building 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 2-5 years
Improvements 5-15 years
Buildings 39-51 years
Upon retirement or disposition, the asset cost and related accumulated depreciation are removed with any gain or loss recognized in the income
statement. Repair and maintenance costs, including planned maintenance, are expensed as incurred.
Research and Development and 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, material
costs, depreciation 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 detailed program design or working model, if no program
design is completed. Capitalized costs are amortized over periods ranging from eighteen months to two years which represent the products' estimated useful
lives. Unamortized software development costs were $435.0 million and $355.7 million at December 31, 2008 and 2007, respectively, and are included in
other assets, net. Amortization expense was $230.3 million, $194.4 million and $166.9 million in 2008, 2007 and 2006, respectively. Additionally, in the
fourth quarter of 2008, $16.9 million of capitalized software development costs were included in the $247.9 million restructuring program as the forecasted
cash flows from the assets are less than the asset's book value. Amounts capitalized were $326.5 million, $239.8 million and $215.6 million in 2008, 2007 and
2006, respectively. The amounts capitalized include stock-based compensation which is not reflected in the consolidated statement of cash flow as it is a non-
cash item.
Long-lived Assets
Purchased intangible assets, other than goodwill, are amortized over their estimated useful lives which range from one to fifteen years. Intangible assets
include goodwill, developed technology, trademarks and tradenames, customer relationships and customer lists, software licenses, patents and other intangible
assets, which include backlog, non-competition agreements and non-solicitation agreements. The intangible assets are amortized based on the pattern in which
the economic benefits of the intangible assets are estimated to be realized. Goodwill is not amortized and is carried at its historical cost.
We periodically review our long-lived assets 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.
We test goodwill for impairment in the fourth quarter of each year or more frequently if events or changes in circumstances indicate that the asset might
be impaired.
Advertising
Advertising costs are expensed as incurred. Advertising expense was $19.2 million, $9.1 million and $16.1 million in 2008, 2007 and 2006, respectively.
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