Logitech 2015 Annual Report Download - page 199

LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Depreciation is provided using the straight-line method. Plant and buildings are depreciated over
estimated useful lives from ten to twenty-five years, equipment over useful lives from three to five years,
internal-use software development over useful lives of three to seven years and leasehold improvements
over the lesser of the useful life of the improvement or the term of the lease.
When property and equipment is retired or otherwise disposed of, the cost and accumulated
depreciation are relieved from the accounts and the net gain or loss is included in operating expenses.
Valuation of Long-Lived Assets
The Company reviews long-lived assets, such as property and equipment, and finite-lived intangible
assets, for impairment whenever events indicate that the carrying amounts might not be recoverable.
Recoverability of property and equipment, and other finite-lived intangible asset is measured by comparing
the projected undiscounted net cash flows associated with those assets to their carrying values. If an
asset is considered impaired, it is written down to fair value, which is determined based on the asset’s
projected discounted cash flows or appraised value, depending on the nature of the asset. For purposes
of recognition of an impairment for assets held for use, the Company groups assets and liabilities at the
lowest level for which cash flows are separately identifiable.
Goodwill and Other Intangible Assets
The Company’s intangible assets principally include goodwill, acquired technology, trademarks,
and customer contracts. Other intangible assets with finite lives, which include acquired technology,
trademarks and customer contracts, and other are recorded at cost and amortized using the straight-line
method over their useful lives ranging from one year to ten years. Intangible assets with indefinite lives,
which include only goodwill, are recorded at cost and evaluated at least annually for impairment.
In accordance with ASC Topic 350-10 (“ASC 350-10”) as it relates to Goodwill and Other Intangible
Assets, the Company conducts its annual goodwill impairment analysis as of December 31 each year and
as necessary if changes in facts and circumstances indicate that it is more likely than not that the fair value
of its reporting units may be less than its carrying amount. Events or changes in facts and circumstances
that might indicate potential impairment of goodwill include deterioration in general economic conditions,
negative developments in equity and credit markets, adverse changes in the markets in which an entity
operates, increases in input costs that have a negative effect on earnings and cash flows, or a trend
of negative or declining cash flows or a decline in actual or planned revenue or earnings compared
with actual and projected results of relevant prior periods, other relevant entity-specific events such as
changes in management, key personnel, strategy, or customers; contemplation of bankruptcy; or litigation.
Determining the number of reporting units and the fair value of a reporting unit requires the Company to
make judgments and involves the use of significant estimates and assumptions. The Company has two
reporting units: peripherals and video conferencing. The allocation of assets and liabilities to each of the
reporting units also involves judgment and assumptions.
FASB ASC 350-20 permits the Company to make a qualitative assessment of whether it is more
likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-
step goodwill impairment test. If an entity concludes that it is not more likely than not that the fair value of a
reporting unit is less than its carrying amount, it would not be required to perform the two-step impairment
test for that reporting unit. The Company may elect to proceed directly to Step 1 without performing a
qualitative assessment.
Note 2—Summary of Significant Accounting Policies (Continued)
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Annual Report Fiscal Year 2015