Netgear 2010 Annual Report Download - page 43

Table of Contents
indefinite useful lives are not amortized. Long-
lived assets, including property and equipment and intangible assets, are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Such conditions may
include an economic downturn or a change in the assessment of future operations. Determination of recoverability is based on an estimate of
undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-
lived
assets that management expects to hold and use is based on the fair value of the asset. Long-lived assets to be disposed of are reported at the
lower of carrying amount or fair value less costs to sell. The carrying value of the asset is reviewed on a regular basis for the existence of facts,
both internal and external, that may suggest impairment.
During the years ended December 31, 2010 and 2009, there were no events or changes in circumstances that indicated the carrying amount
of our long-lived assets may not be recoverable from their undiscounted cash flows. Consequently, we did not perform an impairment test or
record an impairment of our long-lived assets during those periods.
In the fourth quarter of 2008, a key employee responsible for managing the asset group acquired in connection with our 2006 acquisition of
Skipjam Corp. departed the Company. The departure of this employee, along with the recent economic environment, resulted in our decision to
reduce efforts geared at marketing the related products. As a result, we performed an impairment analysis of these long-lived assets during the
fourth quarter of 2008. Based on the results of the analysis, we recorded an impairment charge within cost of revenue in the Consolidated
Statements of Operations of $458,000 in the year ended December 31, 2008 for the net carrying value of intangibles acquired in connection with
our 2006 acquisition of Skipjam Corp.
We will continue to evaluate the carrying value of our long-lived assets and if we determine in the future that there is a potential further
impairment, we may be required to record additional charges to earnings which could affect our financial results.
Income Taxes
We account for income taxes under an asset and liability approach. Under this method, income tax expense is recognized for the amount of
taxes payable or refundable for the current year. In addition, deferred tax assets and liabilities are recognized for the expected future tax
consequences of temporary differences resulting from different treatments for tax versus accounting of certain items, such as accruals and
allowances not currently deductible for tax purposes. These differences result in deferred tax assets and liabilities, which are included within the
consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to
the extent we believe that recovery is not more likely than not, we must establish a valuation allowance. As of December 31, 2010, we believe
that all of our deferred tax assets are recoverable; however, if there were a change in our ability to recover our deferred tax assets, we would be
required to take a charge in the period in which we determined that recovery was not more likely than not.
Uncertain tax provisions are recognized under guidance that provides that a company should use a more-likely-than-not recognition
threshold based on the technical merits of the income tax position taken. Income tax positions that meet the more-likely-than-not recognition
threshold should be measured in order to determine the tax benefit to be recognized in the financial statements. We include interest expense and
penalties related to uncertain tax positions as additional tax expense.
41