LabCorp 2014 Annual Report Download - page 91

F-12
Long-lived assets, other than goodwill and indefinite-lived assets, are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amounts may not be recoverable. Recoverability of assets to be held and used is
determined by the Company at the level for which there are identifiable cash flows by comparison of the carrying amount of the
assets to future undiscounted net cash flows before interest expense and income taxes expected to be generated by the assets.
Impairment, if any, is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets
(based on market prices in an active market or on discounted cash flows). Assets to be disposed of are reported at the lower of the
carrying amount or fair value. The Company found no instances of impairment as of December 31, 2014 or 2013.
Intangible Assets
Intangible assets are amortized on a straight-line basis over the expected periods to be benefited, as set forth in the table below,
such as legal life for patents and technology and contractual lives for non-compete agreements.
Years
Customer relationships 10 - 30
Patents, licenses and technology 3 - 15
Non-compete agreements 5-10
Trade names 5-10
Debt Issuance Costs
The costs related to the issuance of debt are capitalized and amortized to interest expense over the terms of the related debt.
Professional Liability
The Company is self-insured (up to certain limits) for professional liability claims arising in the normal course of business,
generally related to the testing and reporting of laboratory test results. The Company estimates a liability that represents the ultimate
exposure for aggregate losses below those limits. The liability is discounted and is based on actuarial assumptions and factors for
known and incurred but not reported claims, including the frequency and payment trends of historical claims.
Income Taxes
The Company accounts for income taxes utilizing the asset and liability method. Under this method deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases and for tax loss carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. The Company does not recognize a tax benefit unless the Company concludes
that it is more likely than not that the benefit will be sustained on audit by the taxing authority based solely on the technical merits
of the associated tax position. If the recognition threshold is met, the Company recognizes a tax benefit measured at the largest
amount of the tax benefit that the Company believes is greater than 50% likely to be realized. The Company records interest and
penalties in income tax expense.
Derivative Financial Instruments
Interest rate swap agreements, which have been used by the Company from time to time in the management of interest rate
exposure, are accounted for at fair value. The Company’s zero-coupon subordinated notes contain two features that are considered
to be embedded derivative instruments under authoritative guidance in connection with accounting for derivative instruments and
hedging activities. The Company believes these embedded derivatives had no fair value at December 31, 2014 and 2013.
See Note 18 for the Company’s objectives in using derivative instruments and the effect of derivative instruments and related
hedged items on the Company’s financial position, financial performance and cash flows.
LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)