Medtronic 2012 Annual Report Download - page 82

Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
65
Certain of the Company’s investments in equity and other securities are long-term, strategic investments
in companies that are in varied stages of development. The Company accounts for these investments under
the cost or the equity method of accounting, as appropriate. The valuation of equity and other securities
accounted for under the cost method considers all available financial information related to the investee,
including valuations based on recent third-party equity investments in the investee. If an unrealized loss
for any investment is considered to be other-than-temporary, the loss will be recognized in the consolidated
statements of earnings in the period the determination is made. Equity securities accounted for under the
equity method are initially recorded at the amount of the Company’s investment and adjusted each period
for the Company’s share of the investee’s income or loss and dividends paid. Equity securities accounted
for under both the cost and equity methods are reviewed quarterly for changes in circumstance or the
occurrence of events that suggest the Company’s investment may not be recoverable. See Note 6 for
discussion of the gains and losses recognized on equity and other securities.
Accounts Receivable The Company grants credit to customers in the normal course of business, but
generally does not require collateral or any other security to support its receivables. The Company maintains
an allowance for doubtful accounts for potential credit losses. Uncollectible accounts are written off against
the allowance when it is deemed that a customer account is uncollectible.
Inventories Inventories are stated at the lower of cost or market, with cost determined on a first-in,
first-out basis. Inventory balances are as follows:
April 27, April 29,
(in millions) 2012 2011
___________ ___________ ___________
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,175 $ 1,020
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288 261
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337 338
___________ ___________
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,800 $ 1,619
___________ ___________
___________ ___________
Property, Plant, and Equipment Property, plant, and equipment is stated at cost. Additions and
improvements that extend the lives of the assets are capitalized while expenditures for repairs and
maintenance are expensed as incurred. Depreciation is provided using the straight-line method over the
estimated useful lives of the various assets. Property, plant, and equipment balances and corresponding lives
are as follows:
April 27, April 29, Lives
(in millions) 2012 2011 (in years)
___________ _____________ _____________ ______________
Land and land improvements . . . . . . . . . . . . . . . . . . . . . . . . $ 135$ 136 Up to 20
Buildings and leasehold improvements . . . . . . . . . . . . . . . . 1,475 1,482 Up to 40
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,858 3,813 3-7
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328 301 —
_____________ _____________
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,796 5,732
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . (3,323) (3,244)
_____________ _____________
Property, plant, and equipment, net . . . . . . . . . . . . . . . . . . . $ 2,473$2,488
_____________ _____________
_____________ _____________
Depreciation expense of $498 million, $464 million, and $454 million was recognized in fiscal years
2012, 2011, and 2010, respectively.
Goodwill Goodwill is the excess of the purchase price of an acquired business over the amounts
assigned to assets acquired and liabilities assumed in a business combination. In accordance with U.S. GAAP,
goodwill is not amortized. Goodwill is tested for impairment annually or whenever an event occurs or
circumstances change that would indicate that the carrying amount may be impaired. Impairment testing
for goodwill is done at a reporting unit level. An impairment loss is recognized when the carrying amount
of the reporting unit’s net assets exceed the estimated fair value of the reporting unit. The estimated fair
value is determined using a discounted future cash flow analysis.