Ingram Micro 2008 Annual Report Download - page 60

Inventories
Inventories are stated at the lower of average cost or market.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated
useful lives noted below. The Company also capitalizes computer software costs that meet both the definition of
internal-use software and defined criteria for capitalization in accordance with Statement of Position No. 98-1,
“Accounting for the Cost of Computer Software Developed or Obtained for Internal Use.” Leasehold improvements
are amortized over the shorter of the lease term or the estimated useful life. Depreciable lives of property and
equipment are as follows:
Buildings ........................................................... 40years
Leasehold improvements................................................ 3-17 years
Distribution equipment ................................................. 5-10 years
Computer equipment and software ........................................ 3-7years
Maintenance, repairs and minor renewals are charged to expense as incurred. Additions, major renewals and
betterments to property and equipment are capitalized.
Long-Lived and Intangible Assets
In accordance with Statement of Financial Accounting Standards No. 144 “Accounting for the Impairment or
Disposal of Long-Lived Assets,” the Company assesses potential impairments to its long-lived assets when events
or changes in circumstances indicate that the carrying amount may not be fully recoverable. If required, an
impairment loss is recognized as the difference between the carrying value and the fair value of the assets. The gross
carrying amount of the finite-lived identifiable intangible assets of $157,318 and $151,069 at January 3, 2009 and
December 29, 2007, respectively, are amortized over their remaining estimated livesranging from 3 to 20 years. The
net carrying amount was $94,268 and $104,125 at January 3, 2009 and December 29, 2007, respectively.
Amortization expense was $15,877, $14,256 and $11,536 for fiscal years 2008, 2007 and 2006, respectively.
The Company completed its required impairment analyses for 2008, which yielded no impairments to the
Company’s long-lived and other identifiable intangible assets.
Goodwill
Goodwill represents the excess of the purchase price overthe fair value of the identifiable net assets acquired in
an acquisition. Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets”
(“FAS 142”) eliminated the amortization of goodwill, but requires that goodwill be reviewed at least annually for
impairment.
In the fourth quarter of 2008, consistent with the drastic decline in the capital markets in general, the Company
experienced a similar decline in the market value of its stock. As a result, the Company’s market capitalization was
significantly lower than its book value. The Company’s reporting units under FAS 142 are its regional operating
segments. While the Latin America region does not have any goodwill, the Company conducted goodwill
impairment tests in each of its other regional reporting units during the fourth quarter of 2008, which coincides
with the timing of the Company’s normal annual impairment test. In performing this test, the Company, among
other things, consulted an independent valuation advisor.
In accordance with FAS 142, the Company used a two step process to test for goodwill impairment. The first
step is to determine if there is an indication of impairment by comparing the estimated fair value of each reporting
unit to its carrying value including existing goodwill. Goodwill is considered impaired if the carrying value of a
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INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)