3M 2015 Annual Report Download - page 57

TableofContents
insuranceactivityareincludedin“Purchasesofmarketablesecuritiesandinvestments”and“Proceedsfrommaturitiesandsaleof
marketablesecuritiesandinvestments,”respectively.
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Inventories:Inventoriesarestatedatthelowerofcostormarket,withcostgenerallydeterminedonafirst-in,first-outbasis.
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Property,plantandequipment:Property,plantandequipment,includingcapitalizedinterestandinternalengineeringcosts,are
recordedatcost.Depreciationofproperty,plantandequipmentgenerallyiscomputedusingthestraight-linemethodbasedonthe
estimatedusefullivesoftheassets.Theestimatedusefullivesofbuildingsandimprovementsprimarilyrangefromtentofortyyears,
withthemajorityintherangeoftwentytofortyyears.Theestimatedusefullivesofmachineryandequipmentprimarilyrangefrom
threetofifteenyears,withthemajorityintherangeoffivetotenyears.Fullydepreciatedassetsareretainedinpropertyand
accumulateddepreciationaccountsuntildisposal.Upondisposal,assetsandrelatedaccumulateddepreciationareremovedfromthe
accountsandthenetamount,lessproceedsfromdisposal,ischargedorcreditedtooperations.Property,plantandequipment
amountsarereviewedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountofanasset
(assetgroup)maynotberecoverable.Animpairmentlosswouldberecognizedwhenthecarryingamountofanassetexceedsthe
estimatedundiscountedfuturecashflowsexpectedtoresultfromtheuseoftheassetanditseventualdisposition.Theamountofthe
impairmentlossrecordediscalculatedbytheexcessoftheasset’scarryingvalueoveritsfairvalue.Fairvalueisgenerally
determinedusingadiscountedcashflowanalysis.
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Conditionalassetretirementobligations:Aliabilityisinitiallyrecordedatfairvalueforanassetretirementobligationassociated
withtheretirementoftangiblelong-livedassetsintheperiodinwhichitisincurredifareasonableestimateoffairvaluecanbe
made.Conditionalassetretirementobligationsexistforcertainlong-termassetsoftheCompany.Theobligationisinitiallymeasured
atfairvalueusingexpectedpresentvaluetechniques.Overtimetheliabilitiesareaccretedforthechangeintheirpresentvalueand
theinitialcapitalizedcostsaredepreciatedovertheremainingusefullivesoftherelatedassets.Theassetretirementobligation
liabilitywas$102millionand$96millionatDecember31,2015and2014,respectively.
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Goodwill:Goodwillistheexcessofcostofanacquiredentityovertheamountsassignedtoassetsacquiredandliabilitiesassumedin
abusinesscombination.Goodwillisnotamortized.Goodwillistestedforimpairmentannuallyinthefourthquarterofeachyear,and
istestedforimpairmentbetweenannualtestsifaneventoccursorcircumstanceschangethatwouldindicatethecarryingamount
maybeimpaired.Impairmenttestingforgoodwillisdoneatareportingunitlevel,withallgoodwillassignedtoareportingunit.
Reportingunitsareonelevelbelowthebusinesssegmentlevel,butcanbecombinedwhenreportingunitswithinthesamesegment
havesimilareconomiccharacteristics.3Mdidnotcombineanyofitsreportingunitsforimpairmenttesting.Animpairmentloss
generallywouldberecognizedwhenthecarryingamountofthereportingunit’snetassetsexceedstheestimatedfairvalueofthe
reportingunit.Theestimatedfairvalueofareportingunitisdeterminedusingearningsforthereportingunitmultipliedbya
price/earningsratioforcomparableindustrygroups,orbyusingadiscountedcashflowanalysis.Companieshavetheoptiontofirst
assessqualitativefactorstodeterminewhetherthefairvalueofareportingunitisnot“morelikelythannot”lessthanitscarrying
amount,whichiscommonlyreferredtoas“Step0”.3MhaschosennottoapplyStep0for2015orpriorperiodannualgoodwill
assessments.
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Intangibleassets:Intangibleassettypesincludecustomerrelated,patents,othertechnology-based,tradenamesandotherintangible
assetsacquiredfromanindependentparty.Intangibleassetswithadefinitelifeareamortizedoveraperiodrangingfromoneto
twentyyearsonasystematicandrationalbasis(generallystraightline)thatisrepresentativeoftheasset’suse.Theestimateduseful
livesvarybycategory,withcustomerrelatedlargelybetweenseventoseventeenyears,patentslargelybetweenfivetothirteenyears,
othertechnology-basedlargelybetweentwotofifteenyears,definitelivedtradenameslargelybetweenthreeandtwentyyears,and
otherintangibleslargelybetweentwototenyears.Costsrelatedtointernallydevelopedintangibleassets,suchaspatents,are
expensedasincurred,primarilyin“Research,developmentandrelatedexpenses.”
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Intangibleassetswithadefinitelifearetestedforimpairmentwhenevereventsorcircumstancesindicatethatthecarryingamountof
anasset(assetgroup)maynotberecoverable.Animpairmentlossisrecognizedwhenthecarryingamountofanassetexceedsthe
estimatedundiscountedcashflowsusedindeterminingthefairvalueoftheasset.The
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