harris corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other Assets and Liabilities — No current assets within the “Other current assets” line item in our
Consolidated Balance Sheet exceeded 5 percent of our total current assets as of July 1, 2011 or July 2, 2010. No
assets within the “Other non-current assets” line item in our Consolidated Balance Sheet exceeded 5 percent of total
assets as of July 1, 2011 or July 2, 2010. No accrued liabilities or expenses within the “Other accrued items” or
“Other long-term liabilities” line items in our Consolidated Balance Sheet exceeded 5 percent of our total current
liabilities or total liabilities, respectively, as of July 1, 2011 or July 2, 2010.
Income Taxes — We follow the liability method of accounting for income taxes. We record the estimated
future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in our
Consolidated Balance Sheet, as well as operating loss and tax credit carryforwards. We follow very specific and
detailed guidelines in each tax jurisdiction regarding the recoverability of any tax assets recorded on the balance
sheet and provide necessary valuation allowances as required. We regularly review our deferred tax assets for
recoverability based on historical taxable income, projected future taxable income, the expected timing of the
reversals of existing temporary differences and tax planning strategies. See Note 23: Income Taxes for additional
information regarding income taxes.
Warranties — On development and production contract sales in our Government Communications Systems and
RF Communications segments, and in the government business in our Integrated Network Solutions segment, the
value or price of our warranty is generally included in the contract and funded by the customer. A provision for
warranties is built into the estimated program costs when determining the profit rate to accrue when applying the
cost-to-cost percentage-of-completion revenue recognition method. Warranty costs, as incurred, are charged to the
specific program’s cost, and both revenue and cost are recognized at that time. Factors that affect the estimated
program cost for warranties include terms of the contract, complexity of the delivered product or service, number of
installed units, historical experience and management’s judgment regarding anticipated rates of warranty claims and
cost per claim.
On product sales in all our segments, we provide for future warranty costs upon product delivery. The specific
terms and conditions of those warranties vary depending upon the product sold, customer and country in which we
do business. In the case of products sold by us, our warranties start from the shipment, delivery or customer
acceptance date and continue as follows:
Segment Warranty Periods
RF Communications One to twelve years
Integrated Network Solutions Less than one year to five years
Government Communications Systems One to two years
Because our products are manufactured, in many cases, to customer specifications and their acceptance is based
on meeting those specifications, we historically have experienced minimal warranty costs. Factors that affect our
warranty liability include the number of installed units, historical experience and management’s judgment regarding
anticipated rates of warranty claims and cost per claim. We assess the adequacy of our recorded warranty liabilities
every quarter and make adjustments to the liability as necessary.
Media, automation and asset management software products sold by our Integrated Network Solutions segment
generally carry a 90-day warranty from the date of shipment. Our liability under these warranties is either to provide
a corrected copy of any portion of the software found not to be in substantial compliance with the specifications or,
if we are unable to do so, to provide a full refund.
Software license agreements and sales contracts for broadcast and new media solutions products in our
Integrated Network Solutions segment generally include provisions for indemnifying customers against certain
specified liabilities should that segment’s products infringe certain intellectual property rights of third parties.
Certain of our Integrated Network Solutions transmission systems customers have notified us of potential claims
against us based on these standard indemnification provisions included in sales contracts between us and these
customers. These indemnification claims arise from litigation brought by a third-party patent licensing company
asserting alleged technology rights against these customers. We are cooperating with these customers in efforts to
mitigate their litigation exposure. To date, we have not incurred material costs as a result of such indemnification
and have not accrued any liabilities related to such obligations in our Consolidated Financial Statements. See
Note 10: Accrued Warranties for additional information regarding warranties.
Foreign Currency Translation — The functional currency for most international subsidiaries is the local
currency. Assets and liabilities are translated at current rates of exchange and income and expense items are
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