the 2009 Annual Report (pdf) - PLX Technology

Inventories
Inventories are valued at the lower of cost (first-in, first-out method) or market (net realizable value). Inventories
were as follows (in thousands):
December 31,
2009 2008
Work-in-process……………………………………………………………… $ 2,242 $ 2,506
Finished goods………………………………………………………………… 7,386 4,751
T ot al………………………………………………………………………… $ 9,628 $ 7,257
The Company evaluates the need for potential provision for inventory by considering a combination of factors,
including the life of the product, sales history, obsolescence and sales forecasts.
Goodwill and Other Intangible Assets
Goodwill represents the excess of cost over the value of net assets of businesses acquired and is carried at cost
unless write-downs for impairment are required. The Company evaluates the carrying value of goodwill on an annual
basis during the fourth quarter and whenever events and changes in circumstances indicate that the carrying amount
may not be recoverable. Such indicators would include a significant reduction in the Company's market capitalization,
a decrease in operating results or a deterioration in the Company's financial position. The Company operates under a
single reporting unit, and accordingly, all of its goodwill is associated with the entire company.
The purchased intangible assets including customer base and developed/core technology were being amortized
over the assets’ useful lives, which ranged from three to five years, utilizing the straight-line or accelerated methods
which approximates the estimated future cash flows from the intangible. Also, see Notes 6 and 7 to the consolidated
financial statements. The Company evaluates other intangible assets for impairment whenever events and
circumstances indicate that such assets might be impaired.
Changes in the carrying amount of goodwill for the years ended December 31, 2009 and 2008 are as follows (in
thousands):
December 31,
2009 2008
Goodwill……………………………………………………… $ 34,692 $ 34,541
Accumulated impairment losses……………………………… (34,692) -
Net goodwill at beginning of period………………………… - 34,541
Changes in pre-acquisition deferred tax balances……………… - 151
Impairment charge…………………………………………… - (34,692)
Goodwill acquired in the acquisition of Oxford……………… 1,367 -
Net goodwill at end of period……………………………… $ 1,367 $ -
Goodwill is required to be tested for impairment annually or at an interim date if an event occurs or conditions
change that would more likely than not reduce the fair value of our reporting unit below its carrying value. During the
quarter ended December 31, 2008, the Company determined that its carrying value exceeded its fair value, indicating
that goodwill was potentially impaired. As a result, the Company initiated the second step of the goodwill impairment
test which involves calculating the implied fair value of its goodwill by allocating the fair value of the Company to all
of its assets and liabilities other than goodwill and comparing it to the carrying amount of goodwill. The Company
determined that there was no implied fair value of its goodwill and recorded an impairment charge of $34.7 million in
2008. Also see Note 6 to the consolidated financial statements.
In the fourth quarter of 2009, the Company tested the goodwill acquired in the acquisition of Oxford in 2009 and
determined there was no impairment.
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