CDW 2004 Annual Report Download - page 44

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Accounts Receivable
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. As previously
discussed in this footnote, the allowance for doubtful accounts is our best estimate of losses resulting from the
inability of our customers to make required payments.
Merchandise Inventory
Inventory is valued at the lower of cost or market. Cost is determined on the first-in, first-out method.
Property and Equipment
Property and equipment are stated at cost. We calculate depreciation using the straight-line method over
the useful lives of the assets. Expenditures for major renewals and improvements that extend the useful
life of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to
expense as incurred. The following table shows estimated useful lives of property and equipment:
Classification Estimated Useful Lives
Machinery and equipment 5 to 15 years
Building and leasehold improvements 5 to 15 years
Computer and data processing equipment 2 to 3 years
Computer software 3 to 5 years
Furniture and fixtures 5 years
Revenue Recognition
We record revenues from sales transactions when both risk of loss and title to products sold pass to the
customer. Our shipping terms dictate that the passage of title occurs upon receipt of products by the
customer. The majority of our revenues relate to physical products and are recognized on a gross basis
with the selling price to the customer recorded as net sales and the acquisition cost of the product recorded
as cost of sales. At the time of sale, we also record an estimate for sales returns based on historical
experience. Software assurance products, third party services and extended warranties that we sell (for
which we are not the primary obligor) are recognized on a net basis in accordance with SEC Staff
Accounting Bulletin No. 104, “Revenue Recognition” and Emerging Issues Task Force 99-19, “Reporting
Revenue Gross as a Principal versus Net as an Agent.” Accordingly, such revenues are recognized in net
sales either at the time of sale or over the contract period, based on the nature of the contract, at the net
amount retained by us, with no cost of sales. In accordance with EITF 00-10, “Accounting for Shipping
and Handling Fees and Costs,” we record freight billed to our customers as net sales and the related freight
costs as a cost of sales. Vendor rebates are recorded when earned as a reduction of cost of sales. Price
protection is recorded when earned as a reduction to cost of sales or merchandise inventory, as applicable.
Advertising
Advertising costs are charged to expense in the period incurred. Cooperative reimbursements from
vendors are recorded in the period the related advertising expenditure is incurred. The following table
summarizes advertising costs and cooperative reimbursements for the years ended December 31, 2004,
2003 and 2002, respectively (in thousands):
2004 2003 2002
Gross advertising expenses $ 99,791 $ 91,963 $ 89,079
Less cooperative reimbursements (8,989) (27,834) (85,033)
Net advertising expenses $ 90,802 $ 64,129 $ 4,046