Snapple 2009 Annual Report Download - page 86

Leasehold improvements are depreciated over the shorter of the estimated useful life of the assets or the lease
term. Estimated useful lives are periodically reviewed and, when warranted, are updated.
The Company periodically reviews long-lived assets for impairment whenever events or changes in circum-
stances indicate that their carrying amount may not be recoverable. In order to assess recoverability, DPS compares
the estimated undiscounted future pre-tax cash flows from the use of the asset or group of assets, as defined, to the
carrying amount of such assets. Measurement of an impairment loss is based on the excess of the carrying amount of
the asset or group of assets over the long-lived asset’s fair value. As of December 31, 2009, no analysis was
warranted.
Goodwill and Other Intangible Assets
In accordance with U.S. GAAP the Company classifies intangible assets into three categories: (1) intangible
assets with definite lives subject to amortization; (2) intangible assets with indefinite lives not subject to
amortization; and (3) goodwill. The majority of the Company’s intangible asset balance is made up of brands
which the Company has determined to have indefinite useful lives. In arriving at the conclusion that a brand has an
indefinite useful life, management reviews factors such as size, diversification and market share of each brand.
Management expects to acquire, hold and support brands for an indefinite period through consumer marketing and
promotional support. The Company also considers factors such as its ability to continue to protect the legal rights
that arise from these brand names indefinitely or the absence of any regulatory, economic or competitive factors that
could truncate the life of the brand name. If the criteria are not met to assign an indefinite life, the brand is amortized
over its expected useful life.
Identifiable intangible assets deemed by the Company to have determinable finite useful lives are amortized on
a straight-line basis over their estimated useful lives as follows:
Type of Intangible Asset Useful Life
Brands . .......................................................... 5to15years
Bottler agreements .................................................. 5to15years
Customer relationships and contracts ..................................... 5to10years
DPS conducts tests for impairment in accordance with U.S. GAAP. For intangible assets with definite lives,
tests for impairment must be performed if conditions exist that indicate the carrying value may not be recoverable.
For goodwill and indefinite lived intangible assets, the Company conducts tests for impairment annually, as of
December 31, or more frequently if events or circumstances indicate the carrying amount may not be recoverable.
We use present value and other valuation techniques to make this assessment.
The tests for impairment include significant judgment in estimating the fair value of intangible assets primarily
by analyzing forecasts of future revenues and profit performance. Fair value is based on what the intangible asset
would be worth to a third party market participant. Discount rates are based on a weighted average cost of equity and
cost of debt, adjusted with various risk premiums. These assumptions could be negatively impacted by the various
risks discussed in “Risk Factors” in this Annual Report on Form 10-K. Management’s estimates, which fall under
Level 3, are based on historical and projected operating performance, recent market transactions and current
industry trading multiples. Impairment charges are recorded in the line item impairment of goodwill and intangible
assets in the Consolidated Statements of Operations. Refer to Note 7 for additional information.
Other Assets
The Company provides support to certain customers to cover various programs and initiatives to increase net
sales, including contributions to customers or vendors for cold drink equipment used to market and sell the
Company’s products. These programs and initiatives generally directly benefit the Company over a period of time.
Accordingly, costs of these programs and initiatives are recorded in prepaid expenses and other current assets and
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DR PEPPER SNAPPLE GROUP, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)