Seagate 2010 Annual Report Download - page 80

Table of Contents
SEAGATE TECHNOLOGY PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
classified its entire investment portfolio as available-for-sale and it is stated at fair value with unrealized gains and losses included in
Accumulated other comprehensive income (loss), which is a component of Shareholders' Equity. The amortized cost of debt securities is
adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included in interest income.
Realized gains and losses are included in Other, net. The cost of securities sold is based on the specific identification method.
Restricted Cash and Investments. Restricted cash and investments represents cash and investments that are restricted as to withdrawal or
use for other than current operations.
Allowances for Doubtful Accounts. The Company maintains an allowance for uncollectible accounts receivable based upon expected
collectibility. This reserve is established based upon historical trends, global macroeconomic conditions and an analysis of specific exposures.
The provision for doubtful accounts is recorded as a charge to general and administrative expense.
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 and repairs to property, equipment and leasehold improvements is expensed as incurred.
Impairment of Goodwill and Other Long-lived Assets. The Company accounts for goodwill in accordance with Accounting Standards
Codification (ASC) Topic 350 (ASC 350), Intangibles—Goodwill and Other . As required by ASC 350, the Company tests goodwill of its
reporting units for impairment annually during its fourth quarter or whenever events occur or circumstances change, such as an adverse change
in business climate or a decline in the overall industry, that would more likely than not reduce the fair value of a reporting unit below its carrying
amount.
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 circumstances indicate that the carrying value of those assets may not be
recoverable. The Company performs a recoverability test to assess the recoverability of an asset group. If the recoverability test indicates that the
carrying value of the asset group is not recoverable, the Company will estimate the fair value of the asset group and the excess of the carrying
value over the fair value is allocated pro rata to derive the adjusted carrying value of assets in the asset group. The adjusted carrying value of
each asset in the asset group is not reduced below its fair value.
Derivative Financial Instruments. The Company applies the requirements of ASC Topic 815 (ASC 815), Derivatives and Hedging
. 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.
Establishment of Warranty Accruals. The Company estimates probable product warranty costs at the time revenue is recognized. The
Company generally warrants its products for a period of one to five years. The Company's warranty provision considers estimated product failure
rates and trends (including the
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