Motorola 2012 Annual Report Download - page 52

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For the year ended December 31, 2012, we recognized net periodic pension expense of $188 million related to our U.S.
pension plans, compared to $151 million for the year ended December 31, 2011. Cash contributions of $340 million were made
to the U.S. pension plans during 2012 as compared to $489 million in 2011. In January 2011, the Pension Benefit Guaranty
Corporation (“PBGC”) announced an agreement with Motorola Solutions under which we would contribute $100 million above
and beyond our legal requirement to our U.S. pension plans over the next five years. The Company and the PBGC entered into
the agreement as the Company was in the process of separating Motorola Mobility and pursuing the sale of certain assets of the
Networks business. The Company made $250 million of pension contributions to our U.S. pension plans over the amounts
required in the fourth quarter 2011, of which $100 million fulfilled the PBGC financial obligation. As a result, the Company
has no further financial obligations under this agreement with the PBGC. We maintained all of the U.S. pension liabilities and
the majority of the non-U.S. pension liabilities following the distribution of Motorola Mobility on January 4, 2011, and
following the sale of certain assets and liabilities of the Networks business to NSN on April 29, 2011.
We recognized net postretirement health care expense of $3 million and $20 million for the years ended December 31,
2012 and 2011, respectively. No cash contributions were made to this plan in 2012. We expect to make no cash contributions to
the Postretirement Health Care Benefits Plan in 2013.
The measurement date of all of our retirement plans assets and obligations is December 31.
Valuation and Recoverability of Goodwill
We assess the recorded amount of goodwill for recovery on an annual basis in the fourth quarter of each fiscal year.
Goodwill is assessed more frequently if an event occurs or circumstances change that would indicate it is more-likely-than-not
that the fair value of a reporting unit is below its carrying amount. We continually assess whether any such events and
circumstances have occurred, which requires a significant amount of judgment. Such events and circumstances may include:
adverse changes in macroeconomic conditions, adverse changes in the entity's industry or market, changes in cost factors
negatively impacting earnings and cash flows, negative or declining overall financial performance, events affecting the carrying
value or composition of a reporting unit, or a sustained decrease in share price, among others. Any such adverse event or
change in circumstances could have a significant impact on the recoverability of goodwill and could have a material impact on
our combined financial statements.
The goodwill impairment assessment is performed at the reporting unit level. A reporting unit is an operating segment or
one level below an operating segment (referred to as a “component”). A component of an operating segment is a reporting unit
if the component constitutes a business for which discrete financial information is available and segment management regularly
reviews the operating results of that component. When two or more components of an operating segment have similar
economic characteristics, the components are aggregated and deemed a single reporting unit. An operating segment is deemed
to be a reporting unit if all of its components are similar, if none of its components is a reporting unit, or if the segment
comprises only a single component. Based on this guidance, we have determined that our Government and Enterprise segments
each meet the definition of a reporting unit.
In September 2011, the Financial Accounting Standards Board (the "FASB”) issued guidance which provides an entity
with the option to first 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. If an entity determines this is the case, it is required to perform the two-step
goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be
recognized. If an entity determines that it is more-likely-than-not that the fair value of a reporting is greater than its carrying
amount, the two-step goodwill impairment test is not required. We adopted this guidance as of the fourth quarter of 2011.
2012 &2011
We performed a qualitative assessment to determine whether it was more-likely-than-not that the fair value of each
reporting unit was less than its carrying amount for fiscal year 2012 and fiscal year 2011. In performing this qualitative
assessment, we assessed relevant events and circumstances including macroeconomic conditions, industry and market
conditions, cost factors, overall financial performance, changes in share price, and entity-specific events. In addition, we
considered the fair value derived for each reporting unit in conjunction with the 2010 goodwill impairment test. We compared
this prior fair value against the current carrying value of each reporting unit noting fair value significantly exceeded carrying
value for both reporting units. We performed a sensitivity analysis on the fair value determined for each reporting unit in
conjunction with the 2010 goodwill impairment test for changes in significant assumptions including the weighted average cost
of capital used in the income approach and changes in expected cash flows. For fiscal year 2012, these changes in assumptions
and estimated cash flows resulted in an increase in fair value for the Government reporting unit and a slight decrease in fair
value for the Enterprise reporting unit. In spite of this small decrease in estimated fair value of the Enterprise reporting unit,
the reporting unit's fair value significantly exceeds its carrying value. For fiscal year 2011, these changes in assumptions and
estimated cash flows resulted in an increase in fair value for each reporting unit from the 2010 fair values. As such, for fiscal
years 2012 and 2011, we concluded it is more-likely-than-not that the fair value of each reporting unit exceeds its carrying
value. Therefore, the two-step goodwill impairment test was not required for fiscal year 2012 or fiscal year 2011.