Arrow Electronics 2011 Annual Report Download - page 35

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relate to the sale of supplier service contracts to customers where the company has no future obligation to perform under these
contracts or the rendering of logistics services for the delivery of inventory for which the company does not assume the risks and
rewards of ownership.
Effective January 1, 2011, the company adopted FASB Accounting Standards Update No. 2009-13, "Multiple-Deliverable Revenue
Arrangements" ("ASU No. 2009-13") and Accounting Standards Update No. 2009-14, "Certain Revenue Arrangements That
Include Software Elements" ("ASU No. 2009-14"). ASU No. 2009-13 amends guidance included within ASC Topic 605-25 to
require an entity to use an estimated selling price when vendor specific objective evidence or acceptable third party evidence does
not exist for any products or services included in a multiple element arrangement. The arrangement consideration should be
allocated among the products and services based upon their relative selling prices, thus eliminating the use of the residual method
of allocation. ASU No. 2009-13 also requires expanded qualitative and quantitative disclosures regarding significant judgments
made and changes in applying this guidance. ASU No. 2009-14 amends guidance included within ASC Topic 985-605 to exclude
tangible products containing software components and non-software components that function together to deliver the product's
essential functionality. Entities that sell joint hardware and software products that meet this scope exception will be required to
follow the guidance of ASU No. 2009-13. The adoption of the provisions of ASU No. 2009-13 and ASU No. 2009-14 did not
materially impact the company's consolidated financial position or results of operations.
Accounts Receivable
The company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make
required payments. The allowances for doubtful accounts are determined using a combination of factors, including the length of
time the receivables are outstanding, the current business environment, and historical experience.
Inventories
Inventories are stated at the lower of cost or market. Write-downs of inventories to market value are based upon contractual
provisions governing price protection, stock rotation, and obsolescence, as well as assumptions about future demand and market
conditions. If assumptions about future demand change and/or actual market conditions are less favorable than those projected by
the company, additional write-downs of inventories may be required. Due to the large number of transactions and the complexity
of managing the process around price protections and stock rotations, estimates are made regarding adjustments to the book cost
of inventories. Actual amounts could be different from those estimated.
Investments
The company accounts for available-for-sale investments at fair value, using quoted market prices, and the related holding gains
and losses are included in "Other" in the shareholders' equity section in the company's consolidated balance sheets. The company
assesses its long-term investments accounted for as available-for-sale on a quarterly basis to determine whether declines in market
value below cost are other-than-temporary. When the decline is determined to be other-than-temporary, the cost basis for the
individual security is reduced and a loss is realized in the company's consolidated statement of operations in the period in which
it occurs. The company makes such determination based upon the quoted market price, financial condition, operating results of
the investee, and the company's intent and ability to retain the investment over a period of time, which is sufficient to allow for
any recovery in market value. In addition, the company assesses the following factors:
• broad economic factors impacting the investee's industry;
• publicly available forecasts for sales and earnings growth for the industry and investee; and
• the cyclical nature of the investee's industry.
The company could incur an impairment charge in future periods if, among other factors, the investee's future earnings differ from
currently available forecasts.
Income Taxes
The carrying value of the company's deferred tax assets is dependent upon the company's ability to generate sufficient future
taxable income in certain tax jurisdictions. Should the company determine that it is more likely than not that some portion or all
of its deferred tax assets will not be realized, a valuation allowance to the deferred tax assets would be established in the period
such determination was made.
It is the company's policy to provide for uncertain tax positions and the related interest and penalties based upon management's
assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. At December 31,