Seagate 2009 Annual Report Download - page 81

Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Inventory. Inventories are valued at the lower of cost (which approximates actual cost using the first-in, first-out method) or market.
Market value is based upon an estimated average selling price reduced by estimated cost of completion and disposal.
Property, Equipment and Leasehold Improvements. Property, equipment and leasehold improvements are stated at cost. Equipment and
buildings are depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized
using the straight-line method over the shorter of the estimated life of the asset or the remaining term of the lease. The costs of additions and
substantial improvements to property, equipment and leasehold improvements, which extend the economic life of the underlying assets, are
capitalized. The cost of maintenance repairs to property, equipment and leasehold improvements is expensed as incurred.
Derivative Financial Instruments. The Company applies the requirements of ASC 815, Derivatives and Hedging (previously SFAS
No. 133,
Accounting for Derivative Instruments and Hedging Activities and SFAS No. 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities
). ASC 815 requires that all derivatives be recorded on the balance sheet at fair value and establishes criteria
for designation and effectiveness of hedging relationships (see Note 7).
Strategic Investments. The Company enters into certain strategic investments for the promotion of business and strategic objectives.
Strategic investments are included in the accompanying balance sheets in Other assets, net, are recorded at cost and are periodically analyzed to
determine whether or not there are indicators of impairment. The carrying value of the Company's strategic investments at July 2, 2010 and
July 3, 2009 totaled $28 million and $32 million, respectively.
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
. 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
collectibility is reasonably assured. Revenue from sales of products to direct retail customers and to customers in certain indirect retail channels
is recognized on a sell-through basis.
The Company records estimated product returns at the time of shipment. The Company also estimates reductions to revenue for sales
incentive programs, such as price protection, and volume incentives, and records such reductions 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.
Shipping and Handling. The Company includes costs related to shipping and handling in Cost of revenue for all periods presented.
Restructuring Costs. The Company records restructuring activities, including costs for one-time termination benefits, in accordance with
ASC 420, Restructuring (previously SFAS No. 146 , Accounting for Costs Associated with Exit or Disposal Activities ). Severance costs
accounted for under ASC 420 are recognized when management, having the appropriate authorization, has committed to a restructuring plan and
has communicated those actions to employees. Employee termination benefits covered by existing benefit arrangements are recorded in
accordance with ASC 712, Non-retirement Postemployment Benefits (previously SFAS No. 112, Employers' Accounting for Postemployment
Benefits
). These costs are
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