Invacare 2013 Annual Report Download - page 81

INVACARE CORPORATION AND SUBSIDIAIRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FS-7
Accounting Policies
Nature of Operations: Invacare Corporation is a leading manufacturer and distributor of medical equipment used in the
home based upon the Company’s distribution channels, breadth of product line and net sales. The Company designs, manufactures
and distributes an extensive line of health care products for the non-acute care environment, including the home health care, retail
and continuing care markets.
Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its wholly
owned subsidiaries and include all adjustments, which were of a normal recurring nature, necessary to present fairly the financial
position of the Company as of December 31, 2013 and the results of its operations and changes in its cash flow for the years ended
December 31, 2013, 2012 and 2011, respectively. Certain foreign subsidiaries, represented by the European segment, are
consolidated using a November 30 fiscal year end in order to meet filing deadlines. No material subsequent events have occurred
related to the European segment, which would require disclosure or adjustment to the Company’s financial statements. All
significant intercompany transactions are eliminated.
Use of Estimates: The consolidated financial statements are prepared in conformity with accounting principles generally
accepted in the United States, which require management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results may differ from these estimates.
Accounts Receivable: The Company records accounts receivable when product ships or services are provided to its
unaffiliated customers, risk of loss is passed and title is transferred. The estimated allowance for uncollectible amounts is based
primarily on management's evaluation of the financial condition of specific customers. The Company records accounts receivable
reserves for amounts that may become uncollectible in the future. The Company writes off accounts receivable when it becomes
apparent, based upon customer circumstances, that such amounts will not be collected and legal remedies are exhausted.
Inventories: Inventories are stated at the lower of cost or market with cost determined by the first-in, first-out method. Market
values are based on the lower of replacement cost or estimated net realizable value. Finished goods and work in process inventories
include material, labor and manufacturing overhead costs. Inventories have been reduced by an allowance for excess and obsolete
inventories. The estimated allowance is based on management’s review of inventories on hand compared to estimated future usage
and sales.
Property and Equipment: Property and equipment are stated on the basis of cost. The Company principally uses the straight-
line method of depreciation for financial reporting purposes based on annual rates sufficient to amortize the cost of the assets over
their estimated useful lives. Machinery and equipment as well as furniture and fixtures are generally depreciated using lives of 3
to 10 years, while buildings and improvements are depreciated using lives of 5 to 40 years. Accelerated methods of depreciation
are used for federal income tax purposes. Expenditures for maintenance and repairs are charged to expense as incurred. Amortization
of assets under capital leases is included in depreciation expense.
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount
may not be recoverable. An asset would be considered impaired when the future net undiscounted cash flows generated by the
asset are less than its carrying value. An impairment loss would be recognized based on the amount by which the carrying value
of the asset exceeds its fair value.
Goodwill and Other Intangibles: In accordance with Intangibles—Goodwill and Other, ASC 350, goodwill and indefinite
lived intangibles are subject to annual impairment testing. For purposes of the goodwill impairment test, the fair value of each
reporting unit is estimated by forecasting cash flows and discounting those cash flows using appropriate discount rates. The fair
values are then compared to the carrying value of the net assets of each reporting unit. Intangibles assets are also reviewed for
impairment by estimating forecasted cash flows and discounting those cash flows as needed to calculate impairment amounts.
During 2013, the Company recognized intangible write-down charges of $1,523,000 comprised of: trademarks with indefinite
lives impairment of $568,000, a trademark with a definite life impairment of $123,000, customer list impairment of $442,000 and
a developed technology impairment of $223,000 each recorded in the IPG segment and a customer list impairment of $167,000
recorded in the North America/HME segment.
As a result of the Company's 2012 intangible impairment review, the Company recognized intangible write-down charges
of $773,000 comprised of: trademark impairment with an indefinite life of $279,000 and developed technology impairment of
$398,000 in the IPG segment and a patent impairment of $96,000 in the North America/HME segment.