iRobot 2010 Annual Report Download - page 101

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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 .......................................................... 2-5
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 periodically evaluates the recoverability of long-lived assets, including other purchased
intangible assets whenever events and changes in circumstances, such as reductions in demand or significant
economic slowdowns in the industry, indicate that the carrying amount of an asset may not be fully recoverable.
When indicators of impairment are present, the carrying values of the asset group are evaluated in relation to the
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 is less 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. 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, classified as cost of contract and
research and development, are expensed as incurred.
55
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Form 10-K