Kimberly-Clark 2010 Annual Report Download - page 45

KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
are capitalized. External costs and certain internal costs (including payroll and payroll-related costs of
employees) directly associated with developing significant computer software applications for internal use are
capitalized. Training and data conversion costs are expensed as incurred. Computer software costs are amortized
on the straight-line method over the estimated useful life of the software, which generally does not exceed five
years.
Estimated useful lives are periodically reviewed and, when warranted, changes are made to them. Long-
lived assets, including computer software, are reviewed for impairment whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable. An impairment loss would be
indicated when estimated undiscounted future cash flows from the use and eventual disposition of an asset group,
which are identifiable and largely independent of the cash flows of other asset groups, are less than the carrying
amount of the asset group. Measurement of an impairment loss would be based on the excess of the carrying
amount of the asset over its fair value. Fair value is measured using discounted cash flows or independent
appraisals, as appropriate. When property is sold or retired, the cost of the property and the related accumulated
depreciation are removed from the Consolidated Balance Sheet and any gain or loss on the transaction is included
in income.
The cost of major maintenance performed on manufacturing facilities, composed of labor, materials and
other incremental costs, is charged to operations as incurred. Start-up costs for new or expanded facilities are
expensed as incurred.
Goodwill and Other Intangible Assets
Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired
businesses. Goodwill is not amortized, but rather is tested for impairment annually and whenever events and
circumstances indicate that impairment may have occurred. Impairment testing compares the reporting unit
carrying amount of the goodwill with its fair value. Fair value is estimated based on discounted cash flows. When
the reporting unit carrying amount of goodwill exceeds its fair value, an impairment charge would be recorded.
We have completed the required annual testing of goodwill for impairment for all reporting units and have
determined that goodwill is not impaired.
At December 31, 2010 and 2009, we had intangible assets with indefinite useful lives of $11 million and
$13 million, respectively, related to acquired in-process research and development (“IPR&D”). Acquired IPR&D
is tested for impairment annually or more frequently if events or changes in circumstances indicate that the
acquired IPR&D might be impaired, such as abandonment of the research and development efforts. If
development of a marketable product results from the acquired IPR&D, the acquired IPR&D is amortized to
income over the estimated life of the product.
Intangible assets with finite lives are amortized over their estimated useful lives and are reviewed for
impairment whenever events or changes in circumstances indicate that their carrying amount may not be
recoverable. Estimated useful lives range from 2 to 20 years for trademarks, 5 to 17 years for patents and
developed technologies, and 5 to 15 years for other intangible assets. An impairment loss would be indicated
when estimated undiscounted future cash flows from the use of the asset are less than its carrying amount. An
impairment loss would be measured as the difference between the fair value (based on discounted future cash
flows) and the carrying amount of the asset.
Investments in Equity Companies
Investments in companies over which we have the ability to exercise significant influence and that, in
general, are at least 20 percent-owned by us, are stated at cost plus equity in undistributed net income. These
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