LOGITECH INTERNATIONAL SA - Shareholder.com

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We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances.
Although these estimates are based on management’s best knowledge of current events and actions that may impact the Company in the future,
actual results could differ from those estimates. Management has discussed the development, selection and disclosure of these critical
accounting estimates with the Audit Committee of the Board of Directors.
We believe the following accounting estimates are most critical to our business operations and to an understanding of our financial
condition and results of operations, and reflect the more significant judgments and estimates used in the preparation of our consolidated
financial statements.
Customer Programs
We record accruals for product returns, cooperative marketing arrangements, customer incentive programs and price protection. The
estimated cost of these programs is accrued in the period the Company sells the product or commits to the program as a reduction of revenue or
as an operating expense, if we receive an identifiable benefit from the customer and can reasonably estimate the fair value of that benefit.
Significant management judgments and estimates must be used to determine the cost of these programs in any accounting period.
The Company grants limited rights to return product. Return rights vary by customer, and range from just the right to return defective
product to the right to return a limited percentage of the previous quarter’s purchases, if the customer places an offsetting order for the amount
they returned. Estimates of expected future product returns are recognized at the time of sale based on analyses of historical return trends by
customer and by product, inventories owned by and located at distributors and retailers, current customer demand, current operating conditions,
and other relevant customer and product information, such as stage of product life-cycle. Return trends are influenced by the timing of the sale,
the type of customer, operational policies and procedures, product sell-through, product quality issues, sales levels, market acceptance of
products, competitive pressures, new product introductions, product life cycle status, and other factors. Return rates can fluctuate over time, but
are sufficiently predictable to allow us to estimate expected future product returns.
The Company’s cooperative marketing arrangements include contractual customer marketing and sales incentive programs. We enter into
customer marketing programs with most of our distribution and retail customers allowing customers to receive a credit equal to a set percentage
of their purchases of the Company’s products for various marketing programs. The objective of these programs is to encourage advertising and
promotional events to increase sales of our products. Accruals for the estimated costs of these marketing programs are recorded based on the
contractual percentage of product purchased in the period we recognize revenue. The Company also offers rebates and discounts for certain
types of sell-through programs. Accruals for these sales incentive programs are recorded at the time of sale based on negotiated terms,
historical experience and inventory levels in the channel.
Customer incentive programs include volume and consumer rebates. We offer volume rebates to our distribution and retail customers
related to purchase volumes or sales of specific products by distributors to specified retailers. Reserves for volume rebates are recognized as a
reduction of the sale price at the time of sale. Estimates of required reserves are determined based on negotiated terms, consideration of
historical experience, anticipated volume of future purchases, and inventory levels in the channel. Consumer rebates are offered from time to
time at the Company’s discretion directly to end-users. Estimated costs of consumer rebates and similar incentives are recorded at the time the
incentive is offered, based on the specific terms and conditions. Certain incentive programs, including consumer rebates, require management
to estimate the number of customers who will actually redeem the incentive based on historical experience and the specific terms and
conditions of particular programs.
We have contractual agreements with certain of our customers that contain terms allowing price protection credits to be issued in the
event of a subsequent price reduction (contractual price protection). Our decision to
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