EMC 2009 Annual Report Download - page 37

Table of Contents
vendors. These pricing vendors utilize the most recent observable market information in pricing these securities or, if specific prices are not available for these
securities, use other observable inputs. In the event observable inputs are not available, we assess other factors to determine the security's market value,
including broker quotes or model valuations. Each month, we perform independent price verifications of all of our holdings. In the event a price fails a pre-
established tolerance check, it is researched so that we can assess the cause of the variance to determine what we believe is the appropriate fair market value.
In the event the fair market values that we determine are not accurate or we are unable to liquidate our investments in a timely manner, we may not realize the
recorded value of our investments. We hold investments whose market value is below our cost. The determination of whether unrealized losses on
investments are other than temporary is based upon the type of investments held, market conditions, financial condition and near-term prospects of the issuers,
the underlying value and performance of the collateral, the time to maturity, length of the impairment, magnitude of the impairment and ability and intent to
hold the investment to maturity. Should current market and economic conditions deteriorate, our ability to recover the cost of our investments may be
impaired.
The recoverability of inventories is based upon the types and our levels of inventory held, forecasted demand, pricing, competition and changes in
technology. Should current market and economic conditions deteriorate, our actual recovery could be less than our estimate.
Other intangible assets are evaluated based upon the expected period the asset will be utilized, forecasted cash flows, changes in technology and
customer demand. Changes in judgments on any of these factors could materially impact the value of the asset. We perform an assessment of the
recoverability of goodwill, at least annually, in the fourth quarter of each year. Our assessment is performed at the reporting unit level which, for certain of
our segments, is one step below our segment level. For each assessment, we compare the market value of the reporting unit to its carrying value. We estimate
fair value by employing different methodologies, including a comparison to comparable industry companies and several different discounted cash flow
methodologies. The determination of relevant comparable industry companies impacts our assessment of fair value. Should the operating performance of our
reporting units change in comparison to these companies or should the valuation of these companies change, this could impact our assessment of the fair value
of the reporting units. Our discounted cash flow analyses factor in assumptions on revenue and expense growth rates. These 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. Additionally, these discounted cash flow analyses factor in expected amounts of working capital and weighted average cost of capital.
Changes in judgments on any of these factors could materially impact the value of the reporting unit.
Restructuring Charges
We recognized restructuring charges in 2009, 2008, 2007 and prior years. The restructuring charges include, among other items, estimated 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, negotiations with third parties and finalization of severance agreements with employees. 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 financial reporting purposes. These differences result in deferred
tax assets and liabilities, which are included within our consolidated 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
For our share-based payment awards, we make estimates and assumptions to determine the underlying value of stock options, including volatility,
expected life and forfeiture rates. Additionally, for awards which are performance-based, we make estimates as to the probability of the underlying
performance being achieved. Changes to these estimates and assumptions may have a significant impact on the value and timing of stock-based compensation
expense recognized, which could have a material impact on our financial statements.
New Accounting Pronouncements
See Note A to the Consolidated Financial Statements.
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