Tech Data 2015 Annual Report Download - page 49

Table of Contents
Property and Equipment
Property and equipment are stated at cost and property and equipment under capital leases are stated at the present value of the future minimum
lease payments determined at the inception of the lease. Depreciation expense includes depreciation of purchased property and equipment and
assets recorded under capital leases. Depreciation expense is computed over the shorter of the estimated economic lives or lease periods using
the straight-line method, generally as follows:
Expenditures for renewals and improvements that significantly add to productive capacity or extend the useful life of an asset are capitalized.
Expenditures for maintenance and repairs are charged to operations when incurred. When assets are sold or retired, the cost of the asset and the
related accumulated depreciation are eliminated and any gain or loss is recognized at such time.
Long
-Lived Assets
Long-lived assets are reviewed for potential impairment at such time when events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable. An impairment loss is evaluated when the sum of the expected, undiscounted future net cash flows
is less than the carrying amount of the asset. Any impairment loss is measured by comparing the fair value of the asset to its carrying value.
Goodwill
The Company performs an annual review for the potential impairment of the carrying value of goodwill, or more frequently if current events
and circumstances indicate a possible impairment. An impairment loss is charged to expense in the period identified. This testing includes the
determination of each reporting unit’s fair value using market multiples and discounted cash flow modeling. The Company performs its annual
review for goodwill impairment as of January 31st of each fiscal year.
Intangible Assets
Included within other assets at both January 31, 2015 and 2014 are certain intangible assets including capitalized software and development
costs, as well as customer and vendor relationships, preferred supplier agreements, noncompete agreements and trademarks acquired in
connection with various business acquisitions. Such capitalized costs and intangible assets are being amortized over a period of three to ten
years.
The Company’s capitalized software has been obtained or developed for internal use only. Development and acquisition costs are capitalized
for computer software only when management authorizes and commits to funding a computer software project through the approval of a capital
expenditure requisition, and the software project is either for the development of new software, to increase the life of existing software or to
add significantly to the functionality of existing software. Once these requirements have been met, capitalization would begin at the point that
conceptual formulation, evaluation, design, and testing of possible software project alternatives have been completed. Capitalization ceases
when the software project is substantially complete and ready for its intended use.
Costs of computer software developed or obtained for internal use that are capitalized include external direct costs of materials and services
consumed in developing or obtaining internal-use computer software and payroll and payroll-related costs for the Company’s IT programmers
performing software coding and testing activities (including development of data conversion programs) directly associated with the internal-
use
computer software project. Prepaid maintenance fees associated with a software application are accounted for separately from the related
software and amortized over the life of the maintenance agreement. General, administrative, overhead, training, non-development data
conversion processes, and maintenance costs, as well as the costs associated with the preliminary project and post-implementation stages are
expensed as incurred.
The Company’s accounting policy is to amortize capitalized software costs on a straight-line basis over periods ranging from three to ten
years,
depending upon the nature of the software, the stability of the hardware platform on which the software is installed, its fit in the Company’s
overall strategy, and our experience with similar software. It is the Company’s policy to amortize personal computer-related software, such as
spreadsheet and word processing applications, over three years, which reflects the rapid changes in personal computer software. Mainframe
software licenses are amortized over five years, which is in line with the longer economic life of mainframe systems compared to personal
computer systems. Finally, strategic applications such as customer relationship management and enterprise-wide systems are amortized over
seven to ten years based on their strategic fit and the Company’s historical experience with such applications.
42
Years
Buildings and improvements
15
- 39
Leasehold improvements
3
- 10
Furniture, fixtures and equipment
3
- 10