ASCMA » Topics » Critical Accounting Policies and Estimates

This excerpt taken from the ASCMA 10-K filed Mar 31, 2009.
Critical Accounting Policies and Estimates
Valuation of Long-lived Assets and Amortizable Other Intangible Assets.  We perform impairment tests for our long-lived assets if an event or circumstance indicates that the carrying amount of our long-lived assets may not be recoverable. In response to changes in industry and market conditions, we may also strategically realign our resources and consider restructuring, disposing of, or otherwise exiting businesses. Such activities could result in impairment of our long-lived assets or other intangible assets. We are subject to the possibility of impairment of long-lived assets arising in the ordinary course of business. We regularly consider the likelihood of impairment and may recognize impairment if the carrying amount of a long-lived asset or intangible asset is not recoverable from its undiscounted cash flows in accordance with SFAS No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets”. Impairment is measured as the difference between the carrying amount and the fair value of the asset. We use both the income approach and market approach to estimate fair value. Our estimates of fair value are subject to a high degree of judgment since they include a long-term forecast of future operations. Accordingly, any value ultimately derived from our long-lived assets may differ from our estimate of fair value.
Valuation of Goodwill and Non-amortizable Other Intangible Assets.  We assess the impairment of goodwill annually and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important which could trigger an impairment review include significant underperformance to historical or projected future operating results, substantial changes in our strategy or the manner of use of our assets, significant negative industry or economic trends and the market capitalization . Fair value of each reporting unit is determined through a combination of discounted cash flow models and comparisons to similar businesses in the industry. Our estimates of fair value are subject to a high degree of judgment since they include a long-term forecast of future operations and an estimate of our cost of capital.
Valuation of Trade Receivables.  We must make estimates of the collectibility of our trade receivables. Our management analyzes the collectibility based on historical bad debts, customer concentrations, customer credit- worthiness, current economic trends and changes in our customer payment terms. We record an allowance for doubtful accounts based upon specifically identified receivables that we believe are uncollectible. In addition, we also record an amount based upon a percentage of each aged category of our trade receivables. These percentages are estimated based upon our historical experience of bad debts. Our trade receivables balance was $114,154,000, net of allowance for doubtful accounts of $9,200,000, as of December 31, 2008. As of December 31, 2007, our trade receivables balance was $122,079,000, net of allowance for doubtful accounts of $8,359,000.
Valuation of Deferred Tax Assets.  In accordance with SFAS No. 109, “Accounting for Income Taxes”, we review the nature of each component of our deferred income taxes for reasonableness. As part of this review, we rely on an estimate of our long-term forecast of future operations. After consideration of all available evidence and estimates, we have determined that it is more likely than not that we will not realize the tax benefits associated with


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certain cumulative net operating loss carry forwards and certain other deferred tax assets, and as such, we have established a valuation allowance of $24,461,000 and $17,470,000 as of December 31, 2008 and 2007, respectively.
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