FORM 10-K - Harman

Harman International Industries, Incorporated and Subsidiaries
(Dollars in thousands, except per-share data and unless otherwise indicated)
liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each
reporting unit. We estimate the fair value of each reporting unit using a discounted cash flow methodology. This
requires us to use significant judgment including estimation of future cash flows, which is dependent on internal
forecasts, estimation of the long-term rate of growth for our business, the useful life over which cash flows will
occur, determination of our weighted average cost of capital, and relevant market data.
During the fiscal year ended June 30, 2009, we determined that goodwill related to our Automotive,
Consumer and QNX reporting units was impaired and we recognized an impairment charge of $330.6 million.
Goodwill was $81.9 million at June 30, 2009 compared with $436.4 million at June 30, 2008. Refer to Note 5 –
Goodwill for more information.
Intangible assets primarily consist of patents, trademarks and distribution agreements and are amortized
over periods ranging from 10 months to 17 years. We apply an impairment evaluation whenever events or
changes in business circumstances indicate that the carrying value of our intangible assets may not be
recoverable. Other intangible assets are amortized on a straight-line basis over their estimated economic lives.
We believe that the straight-line method of amortization reflects an appropriate allocation of the cost of the
intangible assets to earnings in proportion to the amount of economic benefits obtained annually by our
Company.
We will continue to monitor the need for additional interim impairment tests, which could result in
additional non-cash impairment charges.
Impairment of Long-Lived Assets: We review the recoverability of our long-lived assets, including
buildings, equipment and other intangible assets, when events or changes in circumstances occur that indicate
that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on
our ability to recover the carrying value of the asset from the expected future cash flows (undiscounted and
without interest charges) of the related operations. If these cash flows are less than the carrying value of such
asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. Our
primary measure of fair value is based on undiscounted cash flows. We completed a review of the recoverability
of our long-lived assets during fiscal year 2009 and determined that our long-lived assets were not impaired.
We will continue to monitor the need for additional interim impairment tests, which could result in
additional non-cash impairment charges.
Pre-Production and Development Costs: We incur pre-production and development costs primarily
related to infotainment systems that we develop for automobile manufacturers pursuant to long-term supply
arrangements. We record certain costs incurred pursuant to these agreements as unbilled costs in accordance with
EITF Issue No. 99-5, “Accounting for Pre-Production Costs Related to Long-Term Supply Agreements”, or the
percentage-of-completion method of AICPA Statement of Position 81-1, “Accounting for Performance of
Construction-Type and Certain Production-Type Contracts.”
At June 30, 2009, unbilled costs at June 30, 2009 were $43.0 million related to pre-production costs and
there were no costs recorded under development contracts. Unbilled costs at June 30, 2008 were $45.7 million,
including $37.3 million of pre-production costs and $8.4 million of costs under development contracts. At
June 30, 2009 and 2008, unbilled costs reimbursable in the next 12 months totaled $14.3 million and $15.2
million, respectively, and were recorded in other current assets. Unbilled costs reimbursable in subsequent years
at June 30, 2009 and 2008 totaled $28.7 million and $30.5 million, respectively and were recorded in other assets
in our Consolidated Balance Sheets. At June 30, 2009 and 2008, we had fixed assets of $22.4 million and $26.9
million, respectively for molds, dies and other tools included in our Consolidated Balance Sheets which our
customers will eventually purchase and own pursuant to long-term supply arrangements.
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