Qualcomm 2004 Annual Report Download - page 66

QUALCOMM 62
Notes to Consolidated Financial Statements continued
Weighted-average amortization periods for finite lived intangible assets, by class, were as follows:
September 30,
2004 2003
Wireless licenses 15 years 15 years
Marketing-related 17 years 19 years
Technology-based 11 years 4 years
Customer-related 8years 10 years
Other 28 years 25 years
Total intangible assets 14 years 15 years
Changes in the weighted-average amortization periods from fiscal 2003 to 2004 resulted from changes associated with additions and dispositions
of intangible assets. Dispositions primarily resulted from discontinued operations (Note 11).
The results of operations and earnings per common share for fiscal 2002, assuming FAS 142 had been adopted at the beginning of fiscal 2002,
are as follows (in millions, except per share data):
2002
Reported net income $ 360
Goodwill amortization 249
Adjusted net income $ 609
Earnings per common share:
Basic — as reported $0.23
Basic — as adjusted $0.40
Diluted — as reported $0.22
Diluted — as adjusted $0.38
Valuation of Long-Lived and Intangible Assets
The Company adopted Statement of Financial Accounting Standards No. 144 (FAS 144), “Accounting for the Impairment or Disposal of Long-
Lived Assets” as of the beginning of fiscal 2003. The adoption of this accounting standarddid not have a material impact on the Company’s
operating results and financial position. The Company assesses potential impairments to its long-lived assets when there is evidence that events
or changes in circumstances indicate that the carrying amount of an asset may not be recovered. An impairment loss is recognized when the
carrying amount of the long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable
if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Any required impair-
ment loss is measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value and is recorded as a reduction
in the carrying value of the related asset and a charge to operating results.
Litigation
The Company is currently involved in certain legal proceedings. The Company estimates the range of liability related to pending litigation where
the amount and range of loss can be estimated. The Company records its best estimate of a loss when the loss is considered probable. Where
aliability is probable and there is a range of estimated loss with no best estimate in the range, the Company records the minimum estimated
liability related to the claim. As additional information becomes available, the Company assesses the potential liability related to the Company’s
pending litigation and revises its estimates.
Guarantees and Product Warranties
In the normal course of business, the Company may provide guarantees to other parties. Upon issuance of a guarantee, the Company recognizes
aliability for the fair value of the obligation it assumes under that guarantee, as required. At September 30, 2004, liabilities related to guarantees
wereapproximately $1 million. At September 30, 2003, liabilities related to guarantees werenot significant.
Estimated futurewarranty obligations related to certain products are provided by charges to operations in the period in which the related revenue
is recognized. The Company establishes a reserve for warranty obligations based on its historical warranty experience. Warranty obligations were
$2 million and $4 million at September 30, 2004 and 2003, respectively, and changes in the obligations were not significant during fiscal 2004,
2003 or 2002.
Stock-Based Compensation
The Company records compensation expense for employee stock options based upon their intrinsic value on the date of grant pursuant to
Accounting Principles Board Opinion 25 (APB 25), “Accounting for Stock Issued to Employees.” Because the Company establishes the exercise
price based on the fair market value of the Company’s stock at the date of grant, the stock options have no intrinsic value upon grant, and
therefore no expense is recorded. Each quarter, the Company reports the potential dilutive impact of stock options in its diluted earnings per
common shareusing the treasury-stock method. Out-of-the-money stock options (i.e., the average stock price during the period is below the
strike price of the stock option) arenot included in diluted earnings per common share.