Seagate 2007 Annual Report Download - page 78

Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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Continued)
the acquired company’s brand awareness and market position, as well as assumptions about the period of time the acquired brand will continue
to be used in the combined company’s product portfolio; and discount rates. Unanticipated events and circumstances may occur which may
affect the accuracy or validity of such assumptions, estimates or actual results.
The Company is required to periodically evaluate the carrying values of its intangible assets for impairment. If any of the Company’s
intangible assets are determined to be impaired, the Company may have to write down the impaired asset and its earnings would be adversely
impacted in the period that occurs.
At June 27, 2008, the Company’s goodwill totaled approximately $2.4 billion and its identifiable other intangible assets totaled
$111 million. In accordance with the provisions of SFAS No. 142, Goodwill and Other Intangible Assets
(SFAS No. 142), the Company assesses
the impairment of goodwill at least annually, or more often if warranted by events or changes in circumstances indicating that the carrying value
may exceed its fair value. This assessment may require the projection and discounting of cash flows, an analysis of the Company’s market
capitalization and the estimation of the fair values of tangible and intangible assets and liabilities. Estimates of cash flow are based upon, among
other things, certain assumptions about expected future operating performance; judgment is also exercised in determining an appropriate
discount rate. The Company’s estimates of discounted cash flows may differ from actual cash flows due to, among other things, economic
conditions, changes to the business model, or changes in operating performance. Significant differences between these estimates and actual cash
flows could materially affect the Company’s future financial results.
Basis of Presentation and Consolidation —The consolidated financial statements include the accounts of the Company and all its wholly-
owned subsidiaries, after elimination of intercompany transactions and balances.
The Company operates and reports financial results on a fiscal year of 52 or 53 weeks ending on the Friday closest to June 30.
Accordingly, fiscal years 2008, 2007 and 2006 comprised 52 weeks and ended on June 27, 2008, June 29, 2007 and June 30, 2006, respectively.
All references to years in these notes to consolidated financial statements represent fiscal years unless otherwise noted. Fiscal year 2009 will be
53 weeks and will end on July 3, 2009.
Revenue Recognition, Sales Returns and Allowances, and Sales Incentive Programs —The Company’s revenue recognition policy
complies with Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition (SAB No. 104). Revenue from sales of products, including sales
to distribution customers, is generally recognized when title and risk of loss has passed to the buyer, which typically occurs upon shipment from
the Company or third party warehouse facilities, persuasive evidence of an arrangement exists, including a fixed or determinable price to the
buyer, and when collectability is reasonably assured. For our direct retail customers, revenue is recognized on a sell-through basis.
Estimated product returns are provided for in accordance with SFAS No. 48, Revenue Recognition When Right of Return Exists . The
Company also adheres to the requirements of Emerging Issue Task Force (EITF) No. 01-09 Accounting for Consideration Given by a Vendor to
a Customer , (EITF No. 01-09) for sales incentive programs. Estimated reductions to revenue for sales incentive programs, such as price
protection, and sales growth bonuses, are recorded when revenue is recorded. Marketing development programs are either recorded as a
reduction to revenue or as an addition to marketing expense depending on the contractual nature of the program and whether the conditions of
EITF No. 01-09 have been met.
Product Warranty —The Company warrants its products for periods ranging from three to five years. A provision for estimated future
costs relating to warranty returns is recorded when revenue is recognized and is included in cost of revenue. Shipping and handling costs are also
included in cost of revenue.
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