MANAGEMENT’S DISCUSSION AND ANALYSIS
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate
internal controls over financial reporting.
Our internal control system is designed to give management and the
Board reasonable assurance that our financial statements are prepared
and fairly presented in accordance with Generally Accepted Accounting
Principles. The system assures all transactions are authorized by
management, assets are safeguarded and financial records are reliable.
Management also takes steps to assure the flow of information and
communication is effective, and monitors performance and our internal
control procedures.
Management assessed the effectiveness of our internal controls over
financial reporting as of December 31, 2013, based on the criteria set
out in theInternal Control – Integrated Framework (1992)issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO), and concluded that it was effective at that date. Our
independent auditor, KPMG LLP, issued an audit report stating that, as
of December 31, 2013, we had effective internal controls over financial
reporting in all material respects, based on the same criteria.
All internal control systems, however, no matter how well designed,
have inherent limitations, and even systems that have been determined
to be effective can only provide reasonable assurance about the
preparation and presentation of financial statements.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL
REPORTING AND DISCLOSURE CONTROLS AND
PROCEDURES
There were no changes in 2013 that materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.
Other Information
ACCOUNTING POLICIES
Critical Accounting Estimates
Management makes judgments, estimates and assumptions that affect
how accounting policies are applied and the amounts we report in
assets, liabilities, revenue and expenses and our related disclosure about
contingent assets and liabilities. Significant changes in our assumptions,
including those related to our future business plans and cash flows,
could cause our actual results to be materially different.
These estimates are critical to our business operations and
understanding our results of operations. We may need to use additional
judgment because of the sensitivity of the methods and assumptions
used in determining the asset, liability, revenue and expense amounts.
Fair Value
We use considerable judgment to estimate the fair value of tangible
and intangible assets acquired and liabilities assumed in an acquisition,
using the best available information including information from
financial markets. This may include discounted cash flow analyses which
utilize key assumptions such as discount rates, attrition rates, and
terminal growth rates to estimate future earnings. Actual results may
differ from these estimates.
Useful Lives
We depreciate the cost of property, plant and equipment over their
estimated useful lives by considering industry trends and company-
specific factors, including changing technologies and expectations for
the in-service period of certain assets at the time. We reassess our
estimates of useful lives annually or when circumstances change to
ensure they match the anticipated life of the technology from a
revenue-producing perspective. If technological change happens more
quickly, or in a different way than anticipated, we might have to reduce
the estimated life of property, plant and equipment, which could result
in a higher depreciation expense in future periods or an impairment
charge to write down the value. We will change our depreciation
methods, depreciation rates or asset useful lives if they are different
from our previous estimates. We recognize the effect of these changes
in net income prospectively.
Our intangible assets have increased mainly because of acquisitions. We