Intel 2013 Annual Report Download - page 64

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Inventories
We compute inventory cost on a first-in, first-out basis. Costs incurred to manufacture our products are included in
the valuation of inventory beginning in the quarter in which a product meets the technical criteria to qualify for sale
to customers. Prior to qualification for sale, costs that do not meet the criteria for research and development (R&D)
are included in cost of sales in the period incurred. Inventories at the end of each period were as follows:
(In Millions) Dec 28, 2013 Dec 29, 2012
Raw materials $ 458 $ 478
Work in process 1,998 2,219
Finished goods 1,716 2,037
Total inventories $ 4,172 $ 4,734
Property, Plant and Equipment
Property, plant and equipment, net at the end of each period were as follows:
(In Millions) Dec 28, 2013 Dec 29, 2012
Land and buildings $ 21,098 $ 18,807
Machinery and equipment 40,540 39,033
Construction in progress 11,778 8,206
Total property, plant and equipment, gross 73,416 66,046
Less: accumulated depreciation (41,988) (38,063)
Total property, plant and equipment, net $ 31,428 $ 27,983
We compute depreciation for financial reporting purposes using the straight-line method. Substantially all of our
depreciable property, plant and equipment assets are depreciated over the following estimated useful lives:
machinery and equipment, 2 to 4 years; buildings, 10 to 25 years.
We capitalize a majority of interest on borrowings related to eligible capital expenditures. Capitalized interest is
added to the cost of qualified assets and amortized over the estimated useful lives of the assets. We record capital-
related government grants earned as a reduction to property, plant and equipment.
Goodwill
We record goodwill when the purchase price of an acquisition exceeds the fair value of the net tangible and
identified intangible assets as of the date of acquisition, assigning the goodwill to our applicable reporting units
based on the relative expected fair value provided by the acquisition. We perform a quarterly review of goodwill for
indicators of impairment. During the fourth quarter of each year, we perform an impairment assessment for each
reporting unit, and we perform impairment tests using a fair value approach when necessary. The reporting unit’s
carrying value used in an impairment test represents the assignment of various assets and liabilities, excluding
certain corporate assets and liabilities, such as cash, investments, and debt. For further discussion of goodwill, see
“Note 10: Goodwill.”
Identified Intangible Assets
Licensed technology and patents are generally amortized on a straight-line basis over the periods of benefit. We
amortize all acquisition-related intangible assets that are subject to amortization over their estimated useful life
based on economic benefit. Acquisition-related in-process R&D assets represent the fair value of incomplete R&D
projects that had not reached technological feasibility as of the date of acquisition; initially, these are classified as
“other intangible assets” that are not subject to amortization. Assets related to projects that have been completed
are transferred from “other intangible assets” to “acquisition-related developed technology;” these are subject to
amortization, while assets related to projects that have been abandoned are impaired and expensed to R&D. In the
quarter following the period in which identified intangible assets become fully amortized, we remove the fully
amortized balances from the gross asset and accumulated amortization amounts.
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INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)