Johnson Controls 2014 Annual Report Download - page 64

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in other current assets if reimbursement will occur in less than one year and in other noncurrent assets if reimbursement will occur
beyond one year.
Costs for molds, dies and other tools used to make products that will be sold under long-term supply arrangements are capitalized
within property, plant and equipment if the Company has title to the assets or has the non-cancelable right to use the assets during
the term of the supply arrangement. Capitalized items, if specifically designed for a supply arrangement, are amortized over the
term of the arrangement; otherwise, amounts are amortized over the estimated useful lives of the assets. The carrying values of
assets capitalized in accordance with the foregoing policy are periodically reviewed for impairment whenever events or changes
in circumstances indicate that its carrying amount may not be recoverable. At September 30, 2014 and 2013, approximately $96
million and $99 million, respectively, of costs for molds, dies and other tools were capitalized within property, plant and equipment
which represented assets to which the Company had title. In addition, at September 30, 2014 and 2013, the Company recorded
within the consolidated statements of financial position in other current assets approximately $151 million and $297 million,
respectively, of costs for molds, dies and other tools for which customer reimbursement is contractually assured.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the respective assets
using the straight-line method for financial reporting purposes and accelerated methods for income tax purposes. The estimated
useful lives range from 3 to 40 years for buildings and improvements and from 3 to 15 years for machinery and equipment.
The Company capitalizes interest on borrowings during the active construction period of major capital projects. Capitalized interest
is added to the cost of the underlying assets and is amortized over the useful lives of the assets.
Goodwill and Other Intangible Assets
Goodwill reflects the cost of an acquisition in excess of the fair values assigned to identifiable net assets acquired. The Company
reviews goodwill for impairment during the fourth fiscal quarter or more frequently if events or changes in circumstances indicate
the asset might be impaired. The Company performs impairment reviews for its reporting units, which have been determined to
be the Company’s reportable segments or one level below the reportable segments in certain instances, using a fair value method
based on management’s judgments and assumptions or third party valuations. The fair value of a reporting unit refers to the price
that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date.
In estimating the fair value, the Company uses multiples of earnings based on the average of historical, published multiples of
earnings of comparable entities with similar operations and economic characteristics. In certain instances, the Company uses
discounted cash flow analyses or estimated sales price to further support the fair value estimates. The inputs utilized in the analyses
are classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement." The estimated
fair value is then compared with the carrying amount of the reporting unit, including recorded goodwill. The Company is subject
to financial statement risk to the extent that the carrying amount exceeds the estimated fair value.
Refer to Note 6, "Goodwill and Other Intangible Assets," of the notes to consolidated financial statements for information regarding
the goodwill impairment testing performed in the fourth quarters of fiscal years 2014, 2013 and 2012.
Indefinite lived other intangible assets are also subject to at least annual impairment testing. Other intangible assets with definite
lives continue to be amortized over their estimated useful lives and are subject to impairment testing if events or changes in
circumstances indicate that the asset might be impaired. A considerable amount of management judgment and assumptions are
required in performing the impairment tests.
Refer to Note 17, "Impairment of Long-Lived Assets," of the notes to consolidated financial statements for information regarding
the impairment testing performed in fiscal years 2014, 2013 and 2012.
Impairment of Long-Lived Assets
The Company reviews long-lived assets, including property, plant and equipment and other intangible assets with definite lives,
for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable.
The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, "Impairment or Disposal of
Long-Lived Assets." ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable
cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of
the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable,
an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on
discounted cash flow analysis or appraisals.