Medtronic 2011 Annual Report Download - page 75

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71
Medtronic, Inc.
2009, the Company determined that the fair values of certain cost
method investments were below their carrying values and that
the carrying values of these investments were not expected to
be recoverable within a reasonable period of time. As a result,
the Company recognized $24 million, $40 million, and $4 million
in impairment charges in fiscal years 2011, 2010, and 2009,
respectively. The impairment charges related to the cost method
investments were recorded in other expense, net in the consolidated
statements of earnings. These investments fall within Level 3 of
the fair value hierarchy, due to the use of significant unobservable
inputs to determine fair value, as the investments are privately-
held entities without quoted market prices. To determine the fair
value of these investments, the Company used all pertinent
financial information that was available related to the entities,
including financial statements and market participant valuations
from recent and proposed equity offerings.
The Company assesses the impairment of intangible assets
annually or whenever events or changes in circumstances indicate
that the carrying amount of an intangible asset may not be
recoverable. The aggregate carrying amount of intangible assets
approximated $2.777 billion as of April 29, 2011 and $2.559 billion
as of April 30, 2010. These assets are measured at fair value on a
nonrecurring basis. The fair value of the Company’s intangible
assets is not estimated if there is no change in events or
circumstances that indicate the carrying amount of an intangible
asset may not be recoverable. During fiscal year 2011, the
Company determined that changes in events and circumstances
indicated that the carrying amounts of certain intangible assets
may not be fully recoverable. To determine the impairment, the
Company calculated the excess of the intangible asset’s carrying
value over its fair value utilizing a discounted future cash flow
analysis. As a result of the analysis performed in fiscal year 2011,
the fair values of the intangible assets were deemed to be less
than the carrying values, resulting in pre-tax impairment losses of
$28 million of which $19 million is related to the fiscal year 2011
restructuring initiative and was recorded in restructuring charges
and $9 million was recorded in other expense, net in the Company’s
consolidated statement of earnings. The Company did not record
any intangible asset impairments during fiscal years 2010 or 2009.
The inputs used in the fair value analysis fall within Level 3 of
the fair value hierarchy due to the use of significant unobservable
inputs to determine fair value.
The Company assesses the impairment of property, plant ,
and equipment whenever events or changes in circumstances
indicate that the carrying amount of property, plant, and
equipment assets may not be recoverable. As part of the
Company’s restructuring initiatives, the Company recorded
property, plant, and equipment impairments of $13 million, $8
million, and $7 million during fiscal years 2011, 2010, and 2009,
respectively. For further discussion of the restructuring initiatives
refer to Note 3.
Financial Instruments Not Measured at Fair Value The estimated fair
value of the Company’s long-term debt, including the short-term
portion, at April 29, 2011 was $8.524 billion compared to a
principal value of $8.096 billion, and $10.047 billion compared to
a principal value of $9.711 billion at April 30, 2010. Fair value was
estimated using quoted market prices for the same or similar
instruments. The fair values and principal values consider the
terms of the related debt and exclude the impacts of debt
discounts and derivative/hedging activity.
7. Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill for fiscal years
2011 and 2010 are as follows:
(in millions)
Cardiac and
Vascular Group
Restorative
Therapies
Group Total
Balance as of April 24, 2009 $ 1,392 $ 6,803 $ 8,195
Goodwill as a result of
acquisitions 155 — 155
Purchase accounting
adjustments, net (5) (3) (8)
Currency adjustment, net 46 3 49
Balance as of April 30, 2010 $ 1,588 $ 6,803 $ 8,391
Goodwill as a result of
acquisitions 1,046 33 1,079
Purchase accounting
adjustments, net 25 4 29
Currency adjustment, net 20 18 38
Balance as of April 29, 2011 $2,679 $6,858 $ 9,537
The Company completed its annual goodwill impairment test
during the third quarter for fiscal years ending April 29, 2011,
April 30, 2010, and April 24, 2009 and concluded that there were
no impairments or reporting units that were considered at risk
of impairment.