Medtronic 2013 Annual Report Download - page 79

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Table of Contents
Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
valuations based on recent third-party equity investments in the investee. If an unrealized loss for any investment is considered
to be other-than-temporary, the loss will be recognized in the consolidated statements of earnings in the period the determination
is made. Equity securities accounted for under the equity method are initially recorded at the amount of the Company’s investment
and adjusted each period for the Company’s share of the investee’s income or loss and dividends paid. Equity securities accounted
for under both the cost and equity methods are reviewed quarterly for changes in circumstance or the occurrence of events that
suggest the Company’s investment may not be recoverable. See Note 5 for discussion of the gains and losses recognized on equity
and other securities.
Accounts Receivable The Company grants credit to customers in the normal course of business, but generally does not require
collateral or any other security to support its receivables. The Company maintains an allowance for doubtful accounts for potential
credit losses. Uncollectible accounts are written off against the allowance when it is deemed that a customer account is uncollectible.
Inventories Inventories are stated at the lower of cost or market, with cost determined on a first-in, first-out basis. Inventory
balances are as follows:
April 26, April 27,
(in millions) 2013 2012
Finished goods $ 1,174 $ 1,175
Work in process 248 288
Raw materials 290 337
Total $ 1,712 $ 1,800
Property, Plant, and Equipment Property, plant, and equipment is stated at cost. Additions and improvements that extend the
lives of the assets are capitalized while expenditures for repairs and maintenance are expensed as incurred. Depreciation is provided
using the straight-line method over the estimated useful lives of the various assets. Property, plant, and equipment balances and
corresponding lives are as follows:
April 26, April 27, Lives
(in millions) 2013 2012 (in years)
Land and land improvements $ 151 $ 135 Up to 20
Buildings and leasehold improvements 1,532 1,475 Up to 40
Equipment 4,110 3,858 3-7
Construction in progress 359 328 —
Subtotal 6,152 5,796
Less: Accumulated depreciation (3,662) (3,323)
Property, plant, and equipment, net $ 2,490 $ 2,473
Depreciation expense of $488 million, $498 million, and $464 million was recognized in fiscal years 2013, 2012, and 2011,
respectively.
Goodwill Goodwill is the excess of the purchase price of an acquired business over the amounts assigned to assets acquired and
liabilities assumed in a business combination. In accordance with U.S. GAAP, goodwill is not amortized. Goodwill is tested for
impairment annually or whenever an event occurs or circumstances change that would indicate that the carrying amount may be
impaired. Impairment testing for goodwill is done at a reporting unit level. An impairment loss is recognized when the carrying
amount of the reporting unit’s net assets exceed the estimated fair value of the reporting unit. The estimated fair value is determined
using a discounted future cash flow analysis.
Other Intangible Assets Other intangible assets include patents, trademarks, purchased technology, and in-process research and
development (IPR&D) (since April 25, 2009). Intangible assets with a definite life are amortized on a straight-line or accelerated
basis, as appropriate, with estimated useful lives ranging from three to 20 years. Intangible assets with a definite life are tested
for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset (asset group)
may not be recoverable. Indefinite-lived intangible assets are tested for impairment annually or whenever events or changes in
circumstances indicate that the carrying amount of an intangible asset (asset group) may not be recoverable. Impairment is calculated
as the excess of the asset’s carrying value over its fair value. Fair value is generally determined using a discounted future cash
flow analysis.
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