LOGITECH INTERNATIONAL SA - Shareholder.com
LOGITECH INTERNATIONAL SA - Shareholder.com
LOGITECH INTERNATIONAL SA - Shareholder.com
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Table of Contents<br />
<strong>LOGITECH</strong> <strong>INTERNATIONAL</strong> S.A.<br />
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)<br />
The Company regularly evaluates the adequacy of its accruals for product returns, cooperative marketing arrangements, customer<br />
incentive programs and price protection. When the variables used to estimate these costs change, or if actual costs differ significantly from the<br />
estimates, the Company recognizes adjustments to recorded costs in the period of change. If, at any future time, the Company be<strong>com</strong>es unable<br />
to reasonably estimate these costs, recognition of revenue may be deferred until products are sold to end-users.<br />
Research and Development Costs<br />
Costs related to research, design and development of products are charged to research and development expense as they are incurred.<br />
Advertising Costs<br />
Advertising costs are expensed as incurred and amounted to $169.8 million, $144.2 million and $125.1 million in fiscal years 2007, 2006<br />
and 2005. Advertising costs are recorded as either a marketing and selling expense or a deduction from revenue. Advertising costs reimbursed<br />
by the Company to a customer must have an identifiable benefit and an estimable fair value in order to be classified as an operating expense. If<br />
these criteria are not met, the cost is classified as a reduction of revenue.<br />
Cash Equivalents<br />
The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.<br />
Concentration of Credit Risk<br />
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash<br />
equivalents and accounts receivable. The Company maintains cash and cash equivalents with various financial institutions to limit exposure<br />
with any one financial institution.<br />
The Company sells to large OEMs, distributors and key retailers and, as a result, maintains individually significant receivable balances<br />
with such customers. As of March 31, 2007, one customer represented 16% of total accounts receivable. As of March 31, 2006, two customers<br />
represented 16% and 12% of total accounts receivable. Typical payment terms require customers to pay for product sales generally within 30 to<br />
60 days; however terms may vary by customer type, by country and by selling season. Extended payment terms are sometimes offered to a<br />
limited number of customers during the second and third fiscal quarters. The Company does not modify payment terms on existing receivables.<br />
The Company’s OEM customers tend to be well-capitalized, multi-national <strong>com</strong>panies, while distributors and key retailers may be less<br />
well-capitalized. The Company manages its accounts receivable credit risk through ongoing credit evaluation of its customers’ financial<br />
condition. The Company generally does not require collateral from its customers.<br />
Allowance for Doubtful Accounts<br />
Allowances for doubtful accounts are maintained for estimated losses resulting from the inability of the Company’s customers to make<br />
required payments. The allowances are based on the Company’s regular assessment of the credit worthiness and financial condition of specific<br />
customers, as well as its historical experience with bad debts and customer deductions, receivables aging, current economic trends, geographic<br />
or country-specific risks and the financial condition of its distribution channels. Bad debt expense for fiscal years 2007, 2006 and 2005<br />
amounted to $527,000, $9,000 and $55,000.<br />
F-10