CDW 2012 Annual Report Download - page 64

Table of Contents CDW CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
individual items sold based on the nature of the item. The Company's vendors typically dictate how the EA will be sold to the customer.
From time to time, the Company sells some of its products and services as part of bundled contract arrangements containing multiple
deliverables, which may include a combination of products and services. For each deliverable that represents a separate unit of
accounting, revenue is allocated based upon the relative selling prices of each element as determined by the Company's selling price for
the deliverable when it is sold on a stand-alone basis.
The Company records freight billed to its customers as net sales and the related freight costs as a cost of sales.
Deferred revenue includes (1) payments received from customers in advance of providing the product or performing services, and
(2) amounts deferred if other conditions of revenue recognition have not been met.
The Company performs an analysis of the estimated number of days of sales in-
transit to customers at the end of each period based on a
weighted-average analysis of commercial delivery terms that includes drop-shipment arrangements. This analysis is the basis upon
which the Company estimates the amount of sales in-transit at the end of the period and adjusts revenue and the related costs to reflect
only what has been received by the customer. Changes in delivery patterns may result in a different number of business days used in
making this adjustment and could have a material impact on the Company's revenue recognition for the period.
Sales Taxes
Sales tax amounts collected from customers for remittance to governmental authorities are presented on a net basis in the Company’s
consolidated statements of operations.
Advertising
Advertising costs are generally charged to expense in the period incurred. Cooperative reimbursements from vendors are recorded in the
period the related advertising expenditure is incurred. The Company classifies vendor consideration as a reduction of cost of sales.
Equity-Based Compensation
The Company measures all equity-based payments using a fair-value-based method and records compensation expense over the
requisite service period in its consolidated financial statements. Forfeiture rates have been developed based upon historical experience.
Interest Expense
Interest expense is typically recognized in the period incurred at the applicable interest rate in effect. For increasing-rate debt, the
Company determines the periodic interest cost using the effective interest method over the estimated outstanding term of the debt. The
difference between interest expense recorded and cash interest paid is reflected as short-term or long-term accrued interest in the
Company’s consolidated balance sheets.
Foreign Currency Translation
The Company’s functional currency is the U.S. dollar. The functional currency of the Company’s Canadian subsidiary is the local
currency, the Canadian dollar. Assets and liabilities of this subsidiary are translated at the spot rate in effect at the applicable reporting
date and the consolidated results of operations are translated at the average exchange rates in effect during the applicable period. The
resulting foreign currency translation adjustment is recorded as accumulated other comprehensive income (loss), which is reflected as a
separate component of shareholders’ equity (deficit).
Income Taxes
Deferred income taxes are provided to reflect the differences between the tax bases of assets and liabilities and their reported amounts
in the consolidated financial statements using enacted tax rates in effect for the year in which the differences are expected to reverse.
The Company performs an evaluation of the realizability of deferred tax assets on a quarterly basis. This evaluation requires its use of
estimates and assumptions and considers all positive and negative evidence and factors, such as the scheduled reversal of temporary
differences, the mix of earnings in the jurisdictions in which the Company operates, and prudent and feasible tax planning strategies.
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