Seagate 2009 Annual Report Download - page 88

Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
3. Impairment of Goodwill and Other Long-lived Assets
Goodwill
The Company tests goodwill for impairment on an annual basis and, if required, at an interim date should events occur or circumstances
change that would more likely than not reduce the fair value of goodwill below its carrying value.
During fiscal year 2009, the Company observed a sharp deterioration in the general business environment and in all of its major markets.
The Company determined that a significant adverse change in its business climate had occurred, and completed a review of goodwill for
impairment.
As a result, the Company recorded impairment charges of $2.1 billion for the goodwill of the Hard Disk Drive reporting unit, representing
100% of its carrying value, and $150 million for the goodwill of the Services reporting unit reducing the carrying value to $31 million. These
impairment charges were included in Impairment of goodwill and other long-lived assets, net of recoveries in the Consolidated Statement of
Operations.
The changes in the carrying amount of goodwill by reporting units for fiscal years 2010 and 2009 were as follows:
In accordance with its policy, the Company performed an annual impairment review of the remaining goodwill during its fourth quarter of
fiscal year 2010. The Company concluded that goodwill in the amount of $31 million, which relates entirely to the Company's Services reporting
unit, was not impaired at July 2, 2010.
Other Long-lived Assets (Property, equipment, leasehold improvements, and other intangible assets)
The Company tests other long-lived assets, including property, equipment and leasehold improvements and other intangible assets, subject
to amortization, for recoverability whenever events or changes in circumstance indicate that their carrying value may not be recoverable.
During fiscal year 2010, the Company committed to a plan to sell certain equipment related to certain research activities that have ceased.
The Company recorded a charge of $57 million in order to write down the carrying amount of these assets to estimated fair value less costs to
sell. The Company has substantially completed the sale of these assets.
82
(Dollars in millions) Hard Disk
Drive Services Total
Balance at June 27, 2008
(1)
$
2,199
$
183
$
2,382
Goodwill adjustments
(2)
(32
)
(2
)
(34
)
Impairment charges
(1)
(2,167
)
(150
)
(2,317
)
Balance at July 3, 2009
$
—
$
31
$
31
Balance at July 2, 2010
$
—
$
31
$
31
(1) As adjusted due to a required change in the accounting for convertible debt instruments implemented in the
first quarter of fiscal year 2010, applied on a retrospective basis.
(2) Goodwill adjustments during fiscal year 2009 included an aggregate $25 million reduction in unrecognized
tax benefits during the period, which was recorded as a reduction to goodwill.