Motorola 2012 Annual Report Download - page 65

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method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement consideration is
allocated to the delivered elements and is recognized as revenue.
Cash Equivalents: The Company considers all highly-liquid investments purchased with an original maturity of three
months or less to be cash equivalents. At both December 31, 2012 and December 31, 2011, restricted cash was $63 million.
Sigma Fund: The Company and its wholly-owned subsidiaries invest a significant portion of their U.S. dollar-
denominated cash in a fund (the “Sigma Fund”) that allows the Company to efficiently manage its cash around the world. The
Sigma Fund portfolio is managed by four independent investment management firms. The investment guidelines of the Sigma
Fund require that purchased investments must be in high-quality, investment grade (rated at least A/A-1 by Standard & Poor's
or A2/P-1 by Moody's Investors Service), U.S. dollar-denominated fixed income obligations, including certificates of deposit,
commercial paper, government bonds, corporate bonds and asset- and mortgage-backed securities. Under the Sigma Fund's
investment policies, except for obligations of the U.S. government, agencies and government-sponsored enterprises, no more
than 5% of the Sigma Fund portfolio is to consist of securities of any one issuer. The Sigma Fund's investment policies further
require that floating rate investments must have a maturity at purchase date that does not exceed thirty-six months with an
interest rate that is reset at least annually. The average interest rate reset of the investments held by the funds must be one
hundred twenty days or less. The actual average maturity of the portfolio (excluding cash) was less than one month at both
December 31, 2012 and December 31, 2011.
Investments in the Sigma Fund are carried at fair value. The Company primarily relies on valuation pricing models and
broker quotes to determine the fair value of investments in the Sigma Fund. These pricing models utilize observable inputs
which include, but are not limited to: market quotations, yields, maturities, call features, and the security's terms and
conditions.
Investments: Investments in equity and debt securities classified as available-for-sale are carried at fair value. Debt
securities classified as held-to-maturity are carried at amortized cost. Equity securities that are restricted for more than one year
or that are not publicly traded are carried at cost. Certain investments are accounted for using the equity method if the
Company has significant influence over the issuing entity.
The Company assesses declines in the fair value of investments to determine whether such declines are other-than-
temporary. This assessment is made considering all available evidence, including changes in general market conditions, specific
industry and individual company data, the length of time and the extent to which the fair value has been less than cost, the
financial condition and the near-term prospects of the entity issuing the security, and the Company’s ability and intent to hold
the investment until recovery. Other-than-temporary impairments of investments are recorded to Other within Other income
(expense) in the Company’s consolidated statements of operations in the period in which they become impaired.
Inventories: Inventories are valued at the lower of average cost (which approximates cost on a first-in, first-out basis)
or market (net realizable value or replacement cost).
Property, Plant and Equipment: Property, plant and equipment are stated at cost less accumulated depreciation.
Depreciation is recorded using straight-line, based on the estimated useful lives of the assets (buildings and building equipment,
five to forty years; machinery and equipment, two to ten years) and commences once the assets are ready for their intended use.
Goodwill and Intangible Assets: Goodwill is assessed for impairment at least annually at the reporting unit level. In
September 2011, the FASB issued guidance which provides an entity the option to perform a qualitative assessment to
determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount prior to
performing the two-step goodwill impairment test. If this is the case, the two-step goodwill impairment test is required. If it is
more-likely-than-not that the fair value of a reporting unit is greater than its carrying amount, the two-step goodwill impairment
test is not required. The Company adopted this guidance as of the fourth quarter of 2011.
If the two-step goodwill impairment test is required, first, the fair value of each reporting unit is compared to its book
value. If the fair value of the reporting unit is less than its book value, the Company performs a hypothetical purchase price
allocation based on the reporting unit's fair value to determine the fair value of the reporting unit's goodwill. Fair value is
determined using a combination of present value techniques and market prices of comparable businesses.
Intangible assets are generally amortized on a straight line basis over their respective estimated useful lives ranging from
one to ten years. The Company has no intangible assets with indefinite useful lives.
Impairment of Long-Lived Assets: Long-lived assets, which include intangible assets, held and used by the Company,
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not
be recoverable. The Company evaluates recoverability of assets to be held and used by comparing the carrying amount of an
asset (group) to future net undiscounted cash flows to be generated by the asset (group). If an asset (group) is considered to be
impaired, the impairment to be recognized is equal to the amount by which the carrying amount of the asset (group) exceeds
the asset's (group's) fair value calculated using a discounted future cash flows analysis or market comparables. Assets held for
sale, if any, are reported at the lower of the carrying amount or fair value less cost to sell.