CDW 2006 Annual Report Download - page 45

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Inventory valuation. Inventory is valued at the lower of cost or market value. We decrease the
value of inventory for estimated obsolescence equal to the difference between the cost of
inventory and the estimated market value, based upon an aging analysis of the inventory on
hand, specifically known inventory-related risks, and assumptions about future demand and
market conditions. If future demand or actual market conditions are less favorable than those
projected by management, additional inventory write-downs may be required.
Vendor transactions. We receive incentives from vendors related to cooperative advertising
allowances, volume rebates, bid programs, price protection and other programs. These
incentives generally relate to written agreements with specified performance requirements with
the vendors and are recorded as adjustments to cost of sales or advertising expense, as
appropriate. Vendors may change the terms of some or all of these programs which could have
an impact on our results of operations.
Loss contingencies. We accrue for contingent obligations when a loss is probable and the
amount can be reasonably estimated. As facts concerning contingencies become known, we
reassess our position and make appropriate adjustments to the financial statements.
Intangible assets. We have recorded intangible assets, such as goodwill and customer
relationships, and account for these in accordance with Statement of Financial Accounting
Standards No. 142, “Goodwill and Other Intangible Assets” (SFAS 142). SFAS 142 requires an
annual test of goodwill and indefinite-lived assets for impairment, unless circumstances dictate
more frequent assessments. SFAS 142 also requires that intangible assets with determinable
lives be amortized over their respective estimated useful lives and reviewed annually for
impairment in accordance with Statement of Financial Accounting Standards No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets” (SFAS 144). If circumstances
change or a triggering event were to occur that would indicate impairment, we would be required
to review our intangible assets for impairment and write-downs may be required.
Reclassifications
Certain reclassifications have been made to the prior year financial statements to conform to the
current year presentation.
Cash and Cash Equivalents
Cash and cash equivalents include all deposits in banks and short-term, highly liquid investments
that are readily convertible to known amounts of cash and are so near maturity that there is
insignificant risk of changes in value due to interest rate changes.
Marketable Securities
We classify securities with a stated maturity, which we intend to hold to maturity, as “held-to-
maturity,” and record such securities at amortized cost. Securities which do not have stated
maturities or which we do not intend to hold to maturity are classified as “available-for-sale” and
recorded at fair value, with unrealized holding gains or losses recorded as a separate component
of Shareholders' Equity. We do not invest in trading securities. All securities are accounted for
on a specific identification basis.
Our marketable securities are concentrated in securities of the U.S. Government, U.S.
Government agencies and municipal bonds. Such investments are supported by the financial
stability and credit standing of the U.S. Government or applicable U.S. Government agency or
municipality.