iRobot 2008 Annual Report Download - page 113

Property and Equipment
Property and equipment are recorded at cost and consist primarily of computer equipment, business appli-
cations software and machinery. Depreciation is computed using the straight-line method over the estimated useful
lives as follows:
Estimated
Useful Life
Computer and research equipment ...................................... 3years
Furniture ......................................................... 5
Machinery ........................................................ 2-5
Tooling .......................................................... 2
Business applications software ......................................... 5
Capital leases and leasehold improvements ................................ Termoflease
Expenditures for additions, renewals and betterments of plant and equipment are capitalized. Expenditures for
repairs and maintenance are charged to expense as incurred. As assets are retired or sold, the related cost and
accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to
operations.
Long-Lived Assets, including Purchased Intangible Assets
The Company accounts for long-lived assets, including other purchased intangible assets, in accordance with
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which requires impairment losses
to be recorded on long-lived assets used in operations when indicators of impairment, such as reductions in demand
or significant economic slowdowns in the industry, are present.
The Company periodically evaluates the recoverability of long-lived assets whenever events and changes in
circumstances indicate that the carrying amount of an asset may not be fully recoverable. When indicators of
impairment are present, the carrying values of the assets are evaluated in relation to the operating performance and
future undiscounted cash flows of the underlying business. The net book value of the underlying asset is adjusted to
fair value if the sum of the expected discounted cash flows isless than book value. Fair values are based on estimates
of market prices and assumptions concerning the amount and timing of estimated future cash flows and assumed
discount rates, reflecting varying degrees of perceived risk. There were no impairment charges recorded during any
of the periods presented.
Goodwill
Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and
the fair value of the net tangible and intangible assets acquired. In accordance with SFAS No. 142, Goodwill and
Other Intangible Assets, the Company tests goodwill for impairment at the reporting unit level (operating segment
or one level below an operating segment) annually or more frequently if the Company believes indicators of
impairment exist. The performance of the test involves a two-step process. The first step of the impairment test
involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including
goodwill. If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, the Company performs
the second step of the goodwill impairment test to determine the amount of impairment loss. The second step of the
goodwill impairment test involves comparing the implied fair value of the affected reporting unit’s goodwill with
the carrying value of that goodwill.
Research and Development
Costs incurred in the research and development of the Company’s products are expensed as incurred.
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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Form 10-K