Raytheon 2009 Annual Report Download - page 32

with estimating contract revenues and costs, and assumptions for schedule and technical issues. Due to the size and
nature of many of our contracts, the estimation of total revenues and cost at completion is complicated and subject to
many variables. For example, we must make assumptions regarding the length of time to complete the contract because
costs also include expected increases in wages and prices for materials; consider whether the intent of entering into
multiple contracts was effectively to enter into a single project in order to determine whether such contracts should be
combined or segmented; consider incentives or penalties related to performance on contracts in estimating sales and
profit rates, and record them when there is sufficient information for us to assess anticipated performance; and use
estimates of award fees in estimating sales and profit rates based on actual and anticipated awards. Because of the
significance of the judgments and estimation processes described above, it is likely that materially different amounts
could be recorded if we used different assumptions or if the underlying circumstances were to change. Changes in
underlying assumptions, circumstances or estimates may adversely affect our future results of operations and financial
condition.
We use estimates and assumptions in accounting for our pension and other benefit plans, which are evaluated and updated
on an annual basis. Changes in key estimates and assumptions, such as discount rates and assumed long-term return on
assets (ROA), as well as our actual investment returns on our pension plan assets and other actuarial factors could affect
our earnings, equity and pension contributions in future periods.
We must determine our pension and other benefit plans’ expense or income which involves significant judgment,
particularly with respect to our discount rate, long-term ROA and other actuarial assumptions. If our assumptions
change significantly due to changes in economic, legislative, and/or demographic experience or circumstances, our
pension and other benefit plans’ expense and funded status, and our cash contributions to such plans could negatively
change which would negatively impact our results of operations. In addition, differences between our actual investment
returns and our long-term ROA assumption would result in a change to our pension and other benefit plans’ expense
and funded status and our required contributions to the plans.
For a complete discussion regarding how our financial statements can be affected by pension and other benefit plan
accounting policies, see “Critical Accounting Estimates” on page 34 within Item 7 of this Form 10-K.
We have made, and expect to continue to make, strategic acquisitions and investments, and these activities involve risks
and uncertainties.
In pursuing our business strategies, we continually review, evaluate and consider potential investments and acquisitions.
In evaluating such transactions, we are required to make difficult judgments regarding the value of business
opportunities, technologies and other assets, and the risks and cost of potential liabilities. Furthermore, acquisitions and
investments involve certain other risks and uncertainties, including the difficulty in integrating newly-acquired
businesses, the challenges in achieving strategic objectives and other benefits expected from acquisitions or investments,
the diversion of our attention and resources from our operations and other initiatives, the potential impairment of
acquired assets and the potential loss of key employees of the acquired businesses.
We have entered, and expect to continue to enter, into joint venture, teaming and other arrangements, and these activities
involve risks and uncertainties.
We have entered, and expect to continue to enter, into joint venture, teaming and other arrangements. These activities
involve risks and uncertainties, including the risk of the joint venture or applicable entity failing to satisfy its obligations,
which may result in certain liabilities to us for guarantees and other commitments, the challenges in achieving strategic
objectives and expected benefits of the business arrangement, the risk of conflicts arising between us and our partners and
the difficulty of managing and resolving such conflicts, and the difficulty of managing or otherwise monitoring such
business arrangements.
Goodwill and other intangible assets represent a significant portion of our assets and any impairment of these assets could
negatively impact our results of operations.
At December 31, 2009, we had goodwill and other intangible assets of approximately $12.5 billion, net of accumulated
amortization, which represented approximately 53% of our total assets. Our goodwill is subject to an impairment test on
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