EMC 2011 Annual Report Download - page 41

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Table of Contents
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 operating segments, is one step below our segment level. During 2011, we early adopted the new accounting guidance that allows entities to perform a
qualitative assessment on goodwill impairment to determine whether a quantitative assessment is necessary and, in doing so, we evaluated goodwill for
certain reporting units in a qualitative manner and determined there was no impairment. For the reporting units that we evaluated using a quantitative model,
there was sufficient market value above the carrying value of those reporting units so that we would not expect any near term changes in the operating results
that would trigger an impairment. 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 2011, 2010, 2009 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 sheets. 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 consolidated financial statements.
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