CDW 2014 Annual Report Download - page 75

Table of Contents CDW CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accumulated Other Comprehensive (Loss) Income
Foreign currency translation adjustments are included in shareholders’ equity under accumulated other comprehensive (loss) income.
The components of accumulated other comprehensive (loss) income are as follows:
Revenue Recognition
The Company is a primary distribution channel for a large group of vendors and suppliers, including original equipment manufacturers
(“OEMs”), software publishers and wholesale distributors. The Company records revenue from sales transactions when title and risk of
loss are passed to the customer, there is persuasive evidence of an arrangement for sale, delivery has occurred and/or services have been
rendered, the sales price is fixed or determinable, and collectability is reasonably assured. The Company's shipping terms typically
specify F.O.B. destination, at which time title and risk of loss have passed to the customer.
Revenues from the sales of hardware products and software products and licenses are generally recognized on a gross basis with the
selling price to the customer recorded as sales and the acquisition cost of the product recorded as cost of sales. These items can be
delivered to customers in a variety of ways, including (i) as physical product shipped from the Company's warehouse, (ii) via drop-
shipment by the vendor or supplier, or (iii) via electronic delivery for software licenses. At the time of sale, the Company records an
estimate for sales returns and allowances based on historical experience. The Company's vendor partners warrant most of the products
the Company sells.
The Company leverages drop-shipment arrangements with many of its vendors and suppliers to deliver products to its customers
without having to physically hold the inventory at its warehouses, thereby increasing efficiency and reducing costs. The Company
recognizes revenue for drop-shipment arrangements on a gross basis upon delivery to the customer with contract terms that typically
specify F.O.B. destination.
Revenue from professional services is either recognized as provided for services billed at an hourly rate or recognized using a
proportional performance model for services provided at a fixed fee. Revenue from cloud computing solutions including Software as a
Service ("SaaS") and Infrastructure as a Service ("IaaS") arrangements, as well as data center services such as managed and remote
managed services, server co-location, internet connectivity and data backup and storage, is recognized over the period service is
provided.
The Company also sells certain products for which it acts as an agent. Products in this category include the sale of third-party services,
warranties, software assurance (“SA”) and third-party hosted SaaS and IaaS arrangements. SA is a product that allows customers to
upgrade, at no additional cost, to the latest technology if new applications are introduced during the period that the SA is in effect.
These sales do not meet the criteria for gross sales recognition, and thus are recognized on a net basis at the time of sale. Under net sales
recognition, the cost paid to the vendor or third-party service provider is recorded as a reduction to sales, resulting in net sales being
equal to the gross profit on the transaction.
The Company's larger customers are offered the opportunity by certain of its vendors to purchase software licenses and SA under
enterprise agreements (“EAs”). Under EAs, customers are considered to be compliant with applicable license requirements for the
ensuing year, regardless of changes to their employee base. Customers are charged an annual true-up fee for changes in the number of
users over the year. With most EAs, the Company's vendors will transfer the license and bill the customer directly, paying resellers such
as the Company an agency fee or commission on these sales. The Company records these fees as a component of net sales as earned and
there is no corresponding cost of sales amount. In certain instances, the Company bills the customer directly under an EA and accounts
for the 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, total arrangement consideration is allocated based upon the relative selling
68
(in millions) December 31,
2014
2013 2012
Foreign currency translation adjustment
$
(16.6
)
$
(6.3
)
$
0.4
Accumulated other comprehensive (loss) income
$
(16.6
)
$
(6.3
)
$
0.4