FORM 10-K - Harman

Harman International Industries, Incorporated and Subsidiaries
(Dollars in thousands, except per-share data and unless otherwise indicated)
Accrued Warranties: We warrant our products to be free from defects in materials and workmanship for
periods ranging from six months to six years from the date of purchase, depending on the business segment and
product. Our dealers and warranty service providers normally perform warranty service in field locations and
regional service centers, using parts and replacement finished goods we supply on an exchange basis. Our dealers
and warranty service providers also install updates we provide to correct defects covered by our warranties.
Estimated warranty liabilities are based upon past experience with similar types of products, the technological
complexity of certain products, replacement cost and other factors. If estimates of warranty provisions are no
longer adequate based on our analysis of current activity, incremental provisions are recorded as warranty
expense in our Consolidated Statement of Operations. We take these factors into consideration when assessing
the adequacy of our warranty provision for periods still open to claim. Refer to Note 4 – Accrued Warranties for
more information.
Selling, General and Administrative Expenses: Selling, general and administrative expenses include
non-manufacturing salaries and benefits, share-based compensation expense, occupancy costs, professional fees,
research and development costs, amortization of intangibles, advertising and marketing costs and other operating
expenses.
Advertising Expenses: We expense advertising costs as incurred. When production costs are incurred for
future advertising, these costs are recorded as an asset and subsequently expensed when the advertisement is first
put into service.
Research and Development Expenses: Research and development costs are expensed as incurred. Our
expenditures for research and development, net of customer reimbursements, were $331.7 million, $395.9
million and $356.7 million for the fiscal years ending June 30, 2009, 2008 and 2007, respectively.
Interest Expense, net: Interest expense, net, includes interest expense and amortization of original issue
discount on debt securities and debt issuance costs, net of interest income.
Cash and Cash Equivalents: Cash and cash equivalents includes cash on hand and short-term investments
with original maturities of less than three months.
Inventories, net: Inventories, net are stated at the lower of cost or market. Cost is determined principally by
the first-in, first-out method. The valuation of inventory requires us to make judgments and estimates regarding
obsolete, damaged or excess inventory, as well as current and future demand for our products. Estimation of
inventory valuation reserves requires us to analyze the aging and future demand for inventories and to forecast
future product pricing trends which has an effect on our results of operations. We calculate inventory reserves
using a combination of lower of cost or market analysis, analysis of historical usage data, forecast demand data
and historical disposal rates. Specific product valuation analysis is applied, if practicable, to those items of
inventory representing a higher portion of the value of inventory on-hand. Refer to Note 2 – Inventories, net for
more information.
Property, Plant and Equipment, net: Property, plant and equipment is stated at cost or, in the case of
capitalized leases, at the present value of the future minimum lease payments. Depreciation and amortization of
property, plant and equipment is computed primarily using the straight-line method over useful lives. Refer to
Note 3 – Property, Plant and Equipment, net for more information.
Goodwill and Other Intangible Assets: Goodwill is tested for impairment annually or more frequently if
an event or circumstance indicates that an impairment loss may have been incurred. Application of the goodwill
impairment test requires judgment, including the identification of reporting units, assignment of assets and
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