Garmin 2005 Annual Report Download - page 87

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57
At December 31, 2005 and December 25, 2004, the Company had patents, license agreements, customer
related intangibles and other identifiable finite-lived intangible assets recorded at a cost of $93,472 and $85,909,
respectively. The Company’s excess purchase cost over fair value of net assets acquired (goodwill) was $13,701 at
December 31, 2005 and $12,218 at December 25, 2004.
Identifiable, finite lived intangible assets are amortized over their estimated useful lives on a straight-line
basis over three to ten years. Accumulated amortization was $61,290 and $38,642 at December 31, 2005 and
December 25, 2004 respectively. Amortization expense was $22,648, $20,832, and $6,886, for the years ended
December 31, 2005, December 25, 2004, and December 27, 2003, respectively. In the next five years, the
amortization expense is estimated to be $17,359, $2,663, $1,720, $1,456, and $1,383, respectively.
Marketable Securities
Management determines the appropriate classification of marketable securities at the time of purchase and
reevaluates such designation as of each balance sheet date.
All of the Company’s marketable securities are considered available-for-sale at December 31, 2005. See
Note 3. Available-for-sale securities are stated at fair value, with the unrealized gains and losses, net of tax, reported
in other comprehensive gain. During 2005, unrealized losses of $2,360 were reported in other comprehensive gain,
net of related taxes.
The amortized cost of debt securities classified as available-for-sale is adjusted for amortization of
premiums and accretion of discounts to maturity, or in the case of mortgage-backed securities, over the estimated
life of the security. Such amortization is included in interest income from investments. Realized gains and losses,
and declines in value judged to be other-than-temporary are included in net securities gains (losses). The cost of
securities sold is based on the specific identification method. Realized gains and losses on available-for-sale
securities have not been material in any period.
Income Taxes
The Company accounts for income taxes using the liability method in accordance with SFAS No. 109,
Accounting for Income Taxes. The liability method provides that deferred tax assets and liabilities are recorded
based on the difference between the tax bases of assets and liabilities and their carrying amount for financial
reporting purposes as measured by the enacted tax rates and laws that will be in effect when the differences are
expected to reverse. Income taxes have not been accrued by Garmin Corporation (GC) for the unremitted earnings
of GII totaling approximately $210,216 and $167,567 at December 31, 2005 and December 25, 2004, respectively,
because such earnings are intended to be reinvested in this subsidiary indefinitely. At December 25, 2004, income
taxes had also not been accrued by the Company for the unremitted earnings of GC or GEL because such earnings
were also intended to be reinvested in these subsidiaries indefinitely, at that time.
The Company’s income tax liability balance includes tax contingencies that are recorded to address
potential exposures involving tax positions we have taken that could be challenged by taxing authorities. These
exposures result from the varying applications of statutes, rules, regulations, and interpretations. The Company’s
tax contingencies are established based on judgments about potential actions by taxing jurisdictions and relate to
transfer pricing positions we have taken in a variety of the countries in which we operate, certain tax credits, and
various foreign and state tax matters. The ultimate resolution of these matters may be materially greater or less than
the amount we have accrued and could have a material effect on our effective tax rate in the period when such
matter is resolved.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that affect the amounts