Inventory Property, Plant and Equipment Liability for Warranty Returns Impairment of Long-Lived Assets Research and Development Costs Advertising Costs Comprehensive Income Inventory is carried at the lower of cost or market, with cost being determined using the first-in, first-out method. Standard costs for material, labor, and manufacturing overhead are used to value inventory. All standard costs are  rolled forward on a monthly basis. Therefore, inventory costs approximate actual costs at the end of each reporting  period. ADTRAN establishes reserves for estimated excess, obsolete, or unmarketable inventory by an amount equal  to the difference between the cost of the inventory and the estimated market value of the inventory based upon  assumptions about future demand and market conditions. When excess and obsolete inventories are disposed  of by ADTRAN, the related write-downs are charged against the inventory reserve. Property, plant and equipment, which are stated at cost, are depreciated using methods which approximate straight- line depreciation over the estimated useful lives of the assets. ADTRAN depreciates its building and land improvements from five to 39 years, office machinery and equipment from three to seven years, and its engineering machinery and equipment from three to seven years. Expenditures for repairs and maintenance are charged to expense as incurred; betterments which materially prolong the lives of the assets are capitalized. The cost of assets retired or otherwise  disposed of and the related accumulated depreciation are removed from the accounts and the gain or loss on  such disposition is included in income. ADTRAN’s products generally include warranties of one to 10 years for product defects. ADTRAN accrues for  warranty returns at the cost to repair or replace the defective products at the time revenue is recognized. ADTRAN engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality  of our component suppliers. Our warranty obligation is affected by product failure rates, material usage and other rework costs incurred in correcting a product failure. The liability for warranty returns totaled $1,276,753 and $1,384,429 at December 31, 2002 and 2001, respectively. These liabilities are included in accrued expenses in  the accompanying consolidated balance sheets. Research and development costs are expensed as incurred. Research and development costs totaled $56,295,048, $58,934,952 and $50,628,190 for the years ended December 31, 2002, 2001 and 2000, respectively. Advertising costs are expensed as incurred. Advertising expense was $2,744,093, $2,897,931 and $3,191,014 for the  years ended December 31, 2002, 2001 and 2000, respectively. Comprehensive income consists of all changes in equity (net assets) during a period from non-owner sources. Items included in comprehensive income include net income and changes in unrealized gains and losses on marketable  securities. Comprehensive income is presented in the consolidated statements of changes in stockholders’ equity. 25 Financial Results ADTRAN reviews long-lived assets for impairment under the guidance prescribed by SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets . ADTRAN evaluates long-lived assets used in operations for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable  and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying values. An impairment loss would be recognized in the amount by which the recorded value of the asset exceeds the fair value of the asset, measured by the quoted market price of an asset or an estimate based on the best information available  in the circumstances. There were no such losses recognized during 2002, 2001 and 2000.