INVENTORIES H O N I N D U S T R I E S I n c . a n d S U B S I D I A R I E S PRODUCT WARRANTIES PROPERTY, PLANT, AND EQUIPMENT LONG-LIVED ASSETS REVENUE RECOGNITION GOODWILL AND OTHER INTANGIBLE ASSETS project the ultimate collectibility of the account. As such, these factors  may change over time, causing the reserve level to adjust accordingly. The Company values 96% of its inventory by the last-in, first-out  (LIFO) method. Additionally, the Company evaluates its inventory  reserves in terms of excess and obsolete exposures. This evaluation  includes such factors as anticipated usage, inventory turnover, inven- tory levels, and ultimate product sales value. As such, these factors may  change over time, causing the reserve level to adjust accordingly. Property, plant, and equipment are carried at cost. Depreciation has  been computed using the straight-line method over estimated useful  lives: land improvements, 10–20 years; buildings, 10–40 years; and  machinery and equipment, 3–12 years.  Long-lived assets are reviewed for impairment as events or changes in  circumstances occur indicating that the amount of the asset reflected in  the Company’s balance sheet may not be recoverable. An estimate of  undiscounted cash flows produced by the asset, or the appropriate  group of assets, is compared to the carrying value to determine whether  impairment exists. The estimates of future cash flows involve consider- able management judgment and are based upon assumptions about  expected future operating performance. The actual cash flows could dif- fer from management’s estimates due to changes in business conditions,  operating performance, and economic conditions. Asset impairment  charges connected with the Company’s restructuring activities are dis- cussed in the Restructuring Related Charges note. These assets included  real estate, manufacturing equipment, and certain other fixed assets.  The Company’s continuous focus on improving the manufacturing pro- cess tends to increase the likelihood of assets being replaced; therefore,  the Company is constantly evaluating the expected lives of its equipment  and accelerating depreciation where appropriate. The Company  recorded losses on the disposal of assets in the amount of approximately  $1 million and $5 million during 2003 and 2002, respectively, as a  result of its rapid continuous improvement initiatives. In accordance with SFAS No. 142, the Company evaluates its goodwill  for impairment on an annual basis based on values at the end of third  quarter, or whenever indicators of impairment exist. The Company has  evaluated its goodwill for impairment and has determined that the fair  value of reporting units exceeds their carrying value, so no impairment  of goodwill was recognized. Management’s assumptions about future  cash flows for the reporting units requires significant judgment, and  actual cash flows in the future may differ significantly from those fore- casted today. The Company also determines the fair value of an indefinite  lived trademark on an annual basis, or whenever indications of impair- ment exist. The Company has evaluated its trademark for impairment  and has determined that the fair market value of the trademark exceeds  its carrying value, so no impairment was recognized. The Company issues certain warranty policies on its furniture and  hearth products that provide for repair or replacement of any covered  product or component that fails during normal use because of a defect  in design, materials, or workmanship. A warranty reserve is determined  by recording a specific reserve for known warranty issues and an addi- tional reserve for unknown claims that are expected to be incurred  based on historical claims experience. Actual claims incurred could dif- fer from the original estimates, requiring adjustments to the reserve.  Activity associated with warranty obligations was as follows: Revenue is normally recognized upon shipment of goods to customers.  In certain circumstances revenue is not recognized until the goods are  received by the customer or upon installation and customer acceptance  based on the terms of the sales agreement. Revenue includes freight  charged to customers; related costs are in selling and administrative  expense. Rebates, discounts, and other marketing program expenses  that are directly related to the sale are recorded as a deduction to net  sales. Marketing program accruals require the use of management esti- mates and the consideration of contractual arrangements that are  subject to interpretation. Customer sales that reach certain award levels  can affect the amount of such estimates and actual results could differ  from these estimates. 44 (In thousands) 2003 2002 Balance at the beginning of the period  $ 8,405 $ 5,632 Accruals for warranties issued during the period  7,907 6,542 Accrual related to pre-existing warranties  629 2,686 Settlements made during the period (8,015)  (6,455) Balance at the end of the period  $ 8,926 $ 8,405