Harman Kardon 2010 Annual Report Download - page 102

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Harman International Industries, Incorporated and Subsidiaries
(Dollars in thousands, except per-share data and unless otherwise indicated)
The following table provides the fair value hierarchy for assets and liabilities measured on a non-recurring
basis and the losses recorded during the periods presented:
Fair Value at June 30, 2010
Description Level 1 Level 2 Level 3
Total Losses for the
Year Ended
June 30, 2010
Total Losses for the
Year Ended
June 30, 2009
Assets
Equity method investments ............... $— $— $ 2,108 $(13,122) $ —
Goodwill ............................. — — 105,922 (12,292) (317,743)
Long-lived assets ...................... — — 2,706 (1,189) —
Total ................................ $— $— $110,736 $(26,603) $(317,743)
The following describes the valuation methodologies we use to measure financial and non-financial
instruments accounted for at fair value on a non-recurring basis.
Equity Method Investments. Equity method investments are generally valued using a discounted cash flow
model, comparative market multiples or a combination of both approaches as appropriate. These investments are
generally included in Level 3.
Investments in Subsidiaries and Formerly Consolidated Subsidiaries. Upon a change in control that
results in either consolidation or deconsolidation of a subsidiary, the fair value measurement of our previous
equity investment or retained noncontrolling stake in the former subsidiary, respectively, are valued using an
income approach, a market approach, or a combination of both approaches as appropriate. In applying these
methodologies we rely on a number of factors, including actual operating results, future business plans, economic
projections, market observable pricing multiples of similar businesses and comparable transactions, and possible
control premium. These investments are included in Level 3.
Goodwill: Goodwill is tested for impairment annually or more frequently if an event or circumstance
indicates that an impairment loss may have been incurred. Application of the goodwill impairment test requires
judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units,
assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. We estimate
the fair value of each reporting unit using a discounted cash flow methodology. This requires us to use significant
judgment including estimation of future cash flows, which is dependent on internal forecasts, estimation of the
long-term rate of growth for our business, the useful life over which cash flows will occur, determination of our
weighted average cost of capital, and relevant market data. This asset is included in Level 3. Refer to Note 8 –
Goodwill for more information.
Long-lived Assets. Long-lived assets, including aircraft and real estate, are valued using the best
information available, including quoted market prices or market prices for similar assets when available or
internal cash flow estimates discounted at an appropriate interest rate or independent appraisals, as appropriate.
For real estate, cash flow estimates are based on current market estimates that reflect current and projected lease
profiles and available industry information about expected trends in rental, occupancy and capitalization rates.
These assets are generally included in Level 3.
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