Polaris 2008 Annual Report Download - page 61

Property and equipment: Property and equipment is stated at cost. Depreciation is provided using the straight-
line method over the estimated useful life of the respective assets, ranging from 10-40 years for buildings and
improvements and from 1-7 years for equipment and tooling. Fully depreciated tooling is eliminated from the
accounting records annually.
Goodwill and other assets: SFAS No. 142 prohibits the amortization of goodwill and intangible assets with
indefinite useful lives. SFAS No. 142 requires that these assets be reviewed for impairment at least annually. An
impairment charge is recognized only when the estimated fair value of a reporting unit, including goodwill, is less
than its carrying amount. The Company performed analyses as of December 31, 2008 and December 31, 2007. The
results of the analyses indicated that no goodwill impairment existed. In accordance with SFAS No. 142 the
Company will continue to complete an impairment analysis on an annual basis.
The changes in the carrying amount of goodwill for the years ended December 31, 2008 and 2007 are as
follows (in thousands):
2008 2007
Balance as of beginning of year ................................... $26,447 $25,040
Currency translation effect on foreign goodwill balances ................. (1,754) 1,407
Balance as of end of year ........................................ $24,693 $26,447
As required by SFAS No. 142, intangibles with finite lives continue to be amortized. Included in intangible
assets are patents and customer lists. Intangible assets before accumulated amortization were $615,000 at
December 31, 2008 and 2007. Accumulated amortization was $615,000 at December 31, 2008 and $571,000
at December 31, 2007. The net value of intangible assets is included as a component of Intangible and other assets,
net in the accompanying consolidated balance sheets.
Research and Development Expenses: Polaris records research and development expenses in the period in
which they are incurred as a component of operating expenses. In the years ended December 31, 2008, 2007 and
2006 Polaris incurred $77,472,000, $73,587,000 and $73,889,000, respectively.
Advertising Expenses: Polaris records advertising expenses as a component of selling and marketing expenses
in the period in which they are incurred. In the years ended December 31, 2008, 2007 and 2006 Polaris incurred
$51,193,000, $45,427,000, and $35,239,000, respectively.
Shipping and Handling Costs: Polaris records shipping and handling costs as a component of cost of sales at
the time the product is shipped.
Product warranties: Polaris provides a limited warranty for ORVs for a period of six months and for a period of
one year for its snowmobiles and motorcycles. Polaris may provide longer warranties related to certain promotional
programs, as well as longer warranties in certain geographical markets as determined by local regulations and
market conditions. Polaris’ standard warranties require the Company or its dealers to repair or replace defective
products during such warranty periods at no cost to the consumer. The warranty reserve is established at the time of
sale to the dealer or distributor based on management’s best estimate using historical rates and trends. Adjustments
to the warranty reserve are made from time to time as actual claims become known in order to properly estimate the
amounts necessary to settle future and existing claims on products sold as of the balance sheet date. Factors that
could have an impact on the warranty accrual in any given year include the following: improved manufacturing
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POLARIS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)