Intel 2014 Annual Report Download - page 36

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
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. Based on our analysis, impairments and accelerated depreciation of our property, plant
and equipment was $115 million in 2014 ($172 million in 2013 and $73 million in 2012).
Goodwill
Goodwill is recorded when the purchase price of an acquisition exceeds the fair value of the net tangible and identified intangible
assets acquired. Goodwill is allocated to our reporting units based on the relative expected fair value provided by the acquisition.
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 26: Operating Segments 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. Additionally, as part of this assessment, we may
perform a quantitative analysis to support the qualitative factors above by applying sensitivities to assumptions and inputs used in
measuring a reporting unit’s fair value. 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 reporting unit, goodwill is not considered impaired and we are not required to perform additional
analysis. 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 the 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.
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