Medtronic 2015 Annual Report Download - page 105

Medtronic plc
Notes to Consolidated Financial Statements (Continued)
method investments were below their carrying values and that the carrying values of these investments were not expected to be
recoverable within a reasonable period of time. As a result, the Company recognized $7 million, $10 million, and $21 million in
impairment charges in fiscal years 2015, 2014, and 2013, respectively. These investments fall within Level 3 of the fair value
hierarchy, due to the use of significant unobservable inputs to determine fair value, as the investments are held in privately-held
entities without quoted market prices. To determine the fair value of these investments, the Company used all pertinent financial
information available related to the entities, including financial statements and market participant valuations from recent and
proposed equity offerings.
The Company assesses goodwill for impairment annually in the third quarter and whenever an event occurs or circumstances
change that would indicate that the carrying amount may be impaired. The aggregate carrying amount of goodwill was $40.530
billion and $10.593 billion as of April 24, 2015 and April 25, 2014, respectively.
Impairment testing for goodwill is performed at the reporting unit level. During fiscal year 2015, the Company reassessed the
level for which it has aggregated its reporting units in connection with the annual assessment performed in the third quarter.
Based on the determination of the similar economic characteristics, the components of the Cardiac and Vascular Group were
aggregated into one reporting unit for the annual impairment assessment. Similarly, the components of the Restorative
Therapies Group were aggregated into one reporting unit for the annual impairment assessment. The test for impairment of
goodwill requires the Company to make several estimates about fair value, most of which are based on projected future cash
flows. The Company calculated the excess of each reporting unit’s fair value over its carrying amount, including goodwill,
utilizing a discounted cash flow analysis. As a result of the analysis performed, the fair value of each reporting unit’s goodwill
was deemed to be greater than the carrying value. The Company did not record any goodwill impairments during fiscal years
2015, 2014, or 2013.
The Company assesses IPR&D for impairment annually in the third quarter and whenever an event occurs or circumstances
change that would indicate that the carrying amount may be impaired. The aggregate carrying amount of IPR&D was $470
million and $119 million as of April 24, 2015 and April 25, 2014, respectively. Similar to the goodwill impairment test, the
IPR&D impairment test requires the Company to make several estimates about fair value, most of which are based on projected
future cash flows. The Company calculated the excess of IPR&D asset fair values over their carrying values utilizing a
discounted future cash flow analysis. As a result of the analysis performed during fiscal year 2015, the fair value of certain
IPR&D assets were deemed to be less than their carrying value, resulting in an impairment loss of $5 million, which was
recorded in acquisition-related items in the consolidated statements of income. As a result of the analysis performed during
fiscal years 2014 and 2013, the fair value of IPR&D assets were deemed to be less than the carrying value, resulting in a pre-tax
impairment loss of $207 million and $5 million, respectively. In 2014, the pre-tax impairment loss primarily related to the
Ardian acquisition and was recorded in acquisition-related items in the consolidated statements of income. See discussion
below for additional information on impairments recorded on the Ardian long-lived asset group. Due to the nature of IPR&D
projects, the Company may experience future delays or failures to obtain regulatory approvals to conduct clinical trials, failures
of such clinical trials, delays or failures to obtain required market clearances or other failures to achieve a commercially viable
product, and as a result, may record impairment losses in the future.
The Company assesses intangible assets for impairment whenever events or changes in circumstances indicate that the carrying
amount of an intangible asset (asset group) may not be recoverable. The aggregate carrying amount of intangible assets,
excluding IPR&D and tradenames, was $27.381 billion and $2.167 billion as of April 24, 2015 and April 25, 2014, respectively.
When events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable, the
Company calculates the excess of an intangible asset’s carrying value over its undiscounted future cash flows. If the carrying
value is not recoverable, an impairment loss is recorded based on the amount by which the carrying value exceeds the fair value.
The inputs used in the fair value analysis fall within Level 3 of the fair value hierarchy due to the use of significant
unobservable inputs to determine fair value. The Company did not record any intangible asset impairments during fiscal year
2015. During fiscal year 2014 and 2013, the Company determined that a change in events and circumstances indicated that the
carrying amount of certain intangible assets, representing less than five percent of the total aggregate carrying amount of
intangible assets, may not be fully recoverable. During fiscal year 2014, the carrying amount of Ardian intangible assets was
less than the undiscounted future cash flows, therefore, the Company assessed the fair value of the assets and recorded an
impairment of $41 million that was included in acquisition-related items in the consolidated statements of income. During fiscal
year 2013, the carrying amount of one intangible asset was less than the undiscounted future cash flows, therefore, the Company
assessed the asset’s fair value and there were no material impairments recorded.
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