Seagate 2010 Annual Report Download - page 88

Table of Contents
SEAGATE TECHNOLOGY PLC
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.
The Company did not record any goodwill impairment since fiscal year 2009. 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, in the fiscal year 2009, the Company recorded impairment charges of approximately $2.2 billion for the goodwill of the Hard
Disk Drive reporting unit, representing its entire 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 Statements of Operations. The Company concluded that goodwill in the amount of $31 million, which relates entirely to the
Company's Services reporting unit, was not impaired as of July 1, 2011 and 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 circumstances 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 had 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. As of July 1, 2011, the Company has completed the sale of these assets.
During fiscal year 2009, the Company determined that the adverse change in the business climate discussed under "Goodwill" above was
also an indicator requiring the testing of its other long-lived assets for recoverability. The Company determined that the asset group to be tested
for recoverability was at the reporting unit level as it was the lowest level at which cash flows were identifiable. The Company tested the other
long-lived assets of both the Hard Disk Drive and Services reporting units for recoverability and concluded that the carrying value of the Hard
Disk Drive reporting unit was recoverable while that of the Services reporting unit was not.
The Company recorded impairment charges of $3 million for the property and equipment and intangible assets of the Services reporting
unit during fiscal year 2009. The Company recorded these impairment charges in Impairment of goodwill and other long-lived assets, net of
recoveries in the Consolidated Statements of Operations. No impairment charge was recorded for the intangible assets or property, equipment
and leasehold improvements of the Hard Disk Drive reporting unit.
Other intangible assets consist primarily of existing technology, customer relationships and trade names acquired in business combinations.
Acquired intangibles are amortized on a straight-line basis over the respective estimated useful lives of the assets. Amortization of the existing
technology intangible asset is charged to Cost of revenue while the amortization of the other intangible assets is included in Operating expenses
in the Consolidated Statements of Operations. The carrying values of intangible assets were not
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