Motorola 2009 Annual Report Download - page 91

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objective evidence of fair value does not exist for the delivered element(s). If any of these criteria are not met,
revenue is deferred until the criteria are met or the last element has been delivered.
When elements of an arrangement are separated into more than one unit of accounting, revenue is recognized
for each separate unit of accounting based on the nature of the revenue as described above.
Sales and Use Taxes—The Company records taxes imposed on revenue-producing transactions, including
sales, use, value added and excise taxes, on a net basis with such taxes excluded from 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 December 31, 2009, and 2008, restricted cash was
$206 million and $343 million, respectively.
Sigma Fund: The Company and its wholly-owned subsidiaries invest most of their U.S. dollar-denominated
cash in a fund (the ‘‘Sigma Fund’’) that is designed to provide investment returns similar to a money market fund.
The Sigma Fund portfolio is managed by four premier independent investment management firms. The investment
guidelines of the Sigma Fund require that purchased investments must be high-quality, investment grade (rated at
least A/A-1 by Standard & Poor’s or A2/P-1 by Moody’s Investor Services) U.S. dollar-denominated debt
obligations, including certificates of deposit, commercial paper, government bonds, corporate bonds and asset-
backed and mortgaged-backed securities. Except for debt obligations of the U.S. treasury and U.S. agencies, no
more than 5% of the Sigma Fund portfolio is to consist of debt obligations of a single issuer. The Sigma Fund
investment policies further require that floating rate investments must have a maturity at purchase date that is not
in excess of 36 months with an interest rate that is reset at least annually. The average interest rate that is reset of
investments held in the Sigma Fund must be 120 days or less.
Investments in Sigma Fund are carried at fair value with changes in fair value recorded in the consolidated
statements of operations. The Company primarily relies on valuation pricing models and broker quotes to
determine the fair value of investments in the Sigma Fund. The valuation models are developed and maintained
by third-party pricing services, and use a number of standard inputs, including benchmark yields, reported trades,
broker/dealer quotes where the counterparty is standing ready and able to transact, issuer spreads, benchmark
securities, bids, offers and reference data. For each asset class, quantifiable inputs related to perceived market
movements and sector news may also be considered in addition to the standard inputs.
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 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 and declining-balance methods, based on the estimated
useful lives of the assets (buildings and building equipment, 5-40 years; machinery and equipment, 2-10 years)
and commences once the assets are ready for their intended use.
Goodwill and Intangible Assets: Goodwill is not amortized, but instead is tested for impairment at least
annually. The goodwill impairment test is performed at the reporting unit level and is a two-step analysis. 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.