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Transfer of Ownership of Manufacturing Facility
12 Months Ended
Jun. 30, 2014
Text Block [Abstract]  
Transfer of Ownership of Manufacturing Facility

Note 3—Transfer of Ownership of Manufacturing Facility

On April 10, 2013 (the “Schaidt Agreement Date”), Harman Becker Automotive Systems GmbH (“HBAS”), an indirect wholly-owned subsidiary of Harman, entered into an agreement to transfer the ownership of an automotive manufacturing plant in Germany to a third party, Schaidt KG. Schaidt KG will manufacture and supply products for HBAS based on HBAS’s orders. As consideration for the assumption by Schaidt KG of certain of HBAS’s obligations, HBAS has agreed to pay Schaidt KG €41.1 million, or approximately $53.5 million, plus a bonus of €4.0 million, or approximately $5.2 million, if Schaidt KG meets certain supply obligations, as defined in the agreement. We have determined that the transfer of the manufacturing plant assets cannot be accounted for as a sale since Schaidt KG does not have adequate initial or ongoing investment in the manufacturing plant, and because we will maintain a level of continued involvement such that the risks of ownership have not transferred.

During the fiscal year ended June 30, 2014, approximately €3.2 million, or approximately $4.4 million, of previously accrued indemnification payments were made. During the fiscal year ended June 30, 2014, no further expenses were recognized related to our payment obligations that have been made or which are deemed probable of being made to Schaidt KG to indemnify them for their assumption of certain of our obligations. During the fiscal year ended June 30, 2013, we recognized a €39.9 million, or approximately $51.9 million expense related to the payment obligations that have been made or which are deemed probable of being made to Schaidt KG to indemnify them for their assumption of certain of our obligations. Approximately €16.7 million, or approximately $23.0 million of accrued indemnification payments are expected to be paid over the next two years and are accrued for in Accrued liabilities or Other non-current liabilities in our Consolidated Balance Sheet at June 30, 2014, based on the expected timing. We have revised our estimated useful life of the transferred manufacturing assets to accelerate the depreciation over the expected term of the manufacturing arrangement. Approximately €4.1 million, or $5.6 million and €1.0 million, or $1.3 million, of accelerated depreciation was recorded during the fiscal years ended June 30, 2014 and 2013, respectively. As a result, the manufacturing plant assets will be included in our consolidated financial statements from the Schaidt Agreement Date forward unless future circumstances warrant a change.