Avid 2011 Annual Report Download - page 62

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other factors. If the fee is not fixed or determinable, revenues are recognized only as payments become due from the customer,
provided that all other revenue recognition criteria are met. If a significant portion of the fee is due after the Company's normal
payment terms, which are generally 30 days, but can be up to 90 days, after the invoice date, the Company evaluates whether it
has sufficient history of successfully collecting past transactions with similar terms. If that collection history is sufficient,
revenues are recognized upon delivery of the products, assuming all other revenue recognition criteria are satisfied. If the
Company were to change any of these assumptions and judgments, it could cause a material increase or decrease in the amount of
revenue reported in a particular period.
The Company records as revenues all amounts billed to customers for shipping and handling costs and records its actual shipping
costs as a component of cost of revenues. Reimbursements received from customers for out-of-pocket expenses are recorded as
revenues, with related costs recorded as cost of revenues. The Company presents revenues net of any taxes collected from
customers and remitted to government authorities.
Allowances for Doubtful Accounts
The Company maintains allowances for estimated bad debt losses resulting from the inability of its customers to make required
payments for products or services. When evaluating the adequacy of the allowances, the Company analyzes accounts receivable
balances, historical bad debt experience, customer concentrations, customer credit worthiness and current economic trends. To
date, actual bad debts have not differed materially from management's estimates. If the financial condition of certain customers
were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances could be required.
Translation of Foreign Currencies
The functional currency of each of the Company's foreign subsidiaries is the local currency, except for the Irish manufacturing
branch whose functional currency is the U.S. dollar due to the extensive interrelationship of the operations of the Irish branch and
the U.S. parent and the high volume of intercompany transactions between that branch and the parent. The assets and liabilities of
the subsidiaries whose functional currencies are other than the U.S. dollar are translated into U.S. dollars at the current exchange
rate in effect at the balance sheet date. Income and expense items for these entities are translated using rates that approximate
those in effect during the period. Cumulative translation adjustments are included in accumulated other comprehensive income
(loss), which is reflected as a separate component of stockholders' equity.
The U.S. parent company and its Irish manufacturing branch, both of whose functional currency is the U.S. dollar, carry certain
monetary assets and liabilities denominated in currencies other than the U.S. dollar. These assets and liabilities typically include
cash, accounts receivable and intercompany operating balances denominated in the euro, pound sterling, Japanese yen, Swedish
krona, Danish kroner, Norwegian krone, Canadian dollar, Singapore dollar, Australian dollar, Chinese yuan and Korean won.
These assets and liabilities are remeasured into the U.S. dollar at the current exchange rate in effect at the balance sheet date.
Foreign currency transaction and remeasurement gains and losses are included within marketing and selling expenses in the
results of operations.
The U.S. parent company and various other wholly owned subsidiaries have long-term intercompany loan balances denominated
in foreign currencies that are remeasured into the U.S. dollar at the current exchange rate in effect at the balance sheet date. Such
loan balances are not expected to be settled in the foreseeable future. Any gains and losses relating to these loans are included in
the cumulative translation adjustment account in the balance sheet.
Cash, Cash Equivalents and Marketable Securities
Cash equivalents consist primarily of commercial paper, money market investments and certificates of deposit. The Company
considers all debt instruments purchased with an original maturity of three months or less to be cash equivalents. Marketable
securities have historically consisted of certificates of deposit, commercial paper, asset-backed securities, discount notes, and
corporate, municipal, agency and foreign bonds. The Company generally invests in securities that mature within one year from
the date of purchase. The Company classifies its cash equivalents and marketable securities as “available for sale” and reports
them at fair value, with unrealized gains and losses excluded from earnings and reported as an adjustment to other comprehensive
income (loss), which is reflected as a separate component of stockholders' equity. Amortization or accretion of premium or
discount is included in interest income (expense) in the results of operations. The Company held no available for sale securities
classified as either cash equivalents or marketable securities at December 31, 2011 or 2010. Realized gains and losses from the
sale of marketable securities were not material for the years ended December 31, 2011, 2010 and 2009.