Intel 2012 Annual Report Download - page 35
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Long-Lived Assets
Property, Plant and Equipment
We assess property, plant and equipment for impairment when events or changes in circumstances indicate that the
carrying value of the assets or the asset grouping may not be recoverable. Factors that we consider in deciding when to
perform an impairment review include significant under-performance of a business or product line in relation to
expectations, significant negative industry or economic trends, and significant changes or planned changes in our use of
the assets. We measure the recoverability of assets that we will continue to use in our operations by comparing the
carrying value of the asset grouping to our estimate of the related total future undiscounted net cash flows. If an asset
grouping’s carrying value is not recoverable through the related undiscounted cash flows, the asset grouping is
considered to be impaired. We measure the impairment by comparing the difference between the asset grouping’s
carrying value and its fair value. Property, plant and equipment is considered a non-financial asset and is recorded at fair
value only if an impairment charge is recognized.
Impairments are determined for groups of assets related to the lowest level of identifiable independent cash flows. Due to
our asset usage model and the interchangeable nature of our semiconductor manufacturing capacity, we must make
subjective judgments in determining the independent cash flows that can be related to specific asset groupings. In
addition, as we make manufacturing process conversions and other factory planning decisions, we must make subjective
judgments regarding the remaining useful lives of assets, primarily process-specific semiconductor manufacturing tools
and building improvements. When we determine that the useful lives of assets are shorter than we had originally
estimated, we accelerate the rate of depreciation over the assets’ new, shorter useful lives. Over the past 12 quarters,
including the fourth quarter of 2012, impairments and accelerated depreciation of property, plant and equipment ranged
from zero to $36 million per quarter.
Goodwill
Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified
tangible and intangible assets acquired. Goodwill is allocated to our reporting units based on relative fair value of the
future benefit of the purchased operations to our existing business units as well as the acquired business unit. Reporting
units may be operating segments as a whole or an operation one level below an operating segment, referred to as a
component. Our reporting units are consistent with the operating segments identified in “Note 28: Operating Segment and
Geographic Information” in Part II, Item 8 of this Form 10-K.
We perform an annual impairment assessment in the fourth quarter of each year, or more frequently if indicators of
potential impairment exist, to determine whether it is more likely than not that the fair value of a reporting unit in which
goodwill resides is less than its carrying value. For reporting units in which this assessment concludes that it is more likely
than not that the fair value is more than its carrying value, goodwill is not considered impaired and we are not required to
perform the two-step goodwill impairment test. Qualitative factors considered in this assessment include industry and
market considerations, overall financial performance, and other relevant events and factors affecting the reporting unit.
For reporting units in which the impairment assessment concludes that it is more likely than not that the fair value is less
than its carrying value, we perform the first step of the goodwill impairment test, which compares the fair value of the
reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets
assigned to that unit, goodwill is not considered impaired and we are not required to perform additional testing. If the
carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then we must
perform the second step of the goodwill impairment test to determine the implied fair value of the reporting unit’s goodwill.
If we determine during this second step that the carrying value of a reporting unit’s goodwill exceeds its implied fair value,
we record an impairment loss equal to the difference.
Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. Our goodwill
impairment test uses a weighting of the income method and the market method to estimate the reporting unit’s fair value.
The income method is based on a discounted future cash flow approach that uses the following reporting unit estimates:
revenue, based on assumed market segment growth rates and our assumed market segment share; estimated costs; and
appropriate discount rates based on the reporting units’ weighted average cost of capital as determined by considering
the observable weighted average cost of capital of comparable companies. Our estimates of market segment growth, our
market segment share, and costs are based on historical data, various internal estimates, and a variety of external
sources. These estimates are developed as part of our routine long-range planning process. The same estimates are also
used in planning for our long-term manufacturing and assembly and test capacity needs as part of our capital budgeting
process, and for long-term and short-term business planning and forecasting. We test the reasonableness of the inputs
and outcomes of our discounted cash flow analysis against available comparable market data. The market method is
based on financial multiples of comparable companies and applies a control premium. The reporting unit’s carrying value