Logitech 2007 Annual Report Download - page 89

In addition, the Company is subject to examination by various taxing authorities. We believe we have
adequately provided in the financial statements for additional taxes that we estimate may be required to be paid
as a result of such examinations. If the payment ultimately proves to be unnecessary, the reversal of the tax
liabilities would result in tax benefits being recognized in the period we determine the liabilities are no longer
necessary. If a final tax assessment exceeds our estimate of tax liabilities, an additional charge to expense will
result. See Note 14 – Income Taxes in the Notes to the Consolidated Financial Statements for further discussion.
Valuation of Long-Lived Assets
We review long-lived assets, such as investments, property, plant and equipment, and goodwill and other
intangible assets for impairment whenever events indicate that the carrying amount of these assets might not be
recoverable. Factors considered important which could require us to review an asset for impairment include the
following:
• significant underperformance relative to historical or projected future operating results;
• significant changes in the manner of use of the assets or the strategy for the Company’s overall business;
• significant negative industry or economic trends;
• significant decline in the Company’s stock price for a sustained period; and
• market capitalization relative to net book value.
Recoverability of investments, property, plant and equipment, and other intangible assets is measured by
comparing the projected undiscounted cash flows the asset is expected to generate with its carrying amount. If an
asset is considered impaired, the impairment to be recognized is measured by the excess of the carrying amount
of the asset over its fair value.
We evaluate goodwill for impairment on an annual basis and whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable from our estimated future cash flows. Recoverability of
goodwill is measured at the reporting unit level by comparing the reporting unit’s carrying amount, including
goodwill, to the fair value of the reporting unit. If the carrying amount of the reporting unit exceeds its fair value,
goodwill is considered impaired, and a second test is performed to measure the amount of impairment loss.
While the Company has fully integrated all of its acquired companies, it continues to maintain discrete financial
information for 3Dconnexion and accordingly determines impairment for the goodwill acquired with the
3Dconnexion acquisition at the entity level. All other acquired goodwill is evaluated for impairment at a total
enterprise level.
In determining fair value, we consider various factors including estimates of future market growth and
trends, forecasted revenue and costs, expected periods over which our assets will be utilized, and other variables.
We calculate the Company’s fair value based on the present value of projected cash flows using a discount rate
determined by management to be commensurate to the risk inherent in the Company’s current business model.
To date, we have not recognized any impairment of goodwill. Logitech bases its fair value estimates on
assumptions it believes to be reasonable, but which are inherently uncertain.
Recent Accounting Pronouncements
In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48
defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more-
likely-than-not” to be sustained by the taxing authority and provides guidance on the derecognition, measurement
and classification of income tax uncertainties, along with any related interest and penalties. FIN 48 also includes
guidance concerning accounting for income tax uncertainties in interim periods and increases the level of
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