Garmin 2001 Annual Report Download - page 44

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GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 2. Summary of Significant Accounting Policies (continued)
Income Taxes
The Company accounts for income taxes using the liability method in accordance with SFAS No. 109, Accounting for Income Taxes.
The liability method provides that deferred tax assets and liabilities are recorded based on the difference between the tax bases
of assets and liabilities and their carrying amount for financial reporting purposes as measured by the enacted tax rates and laws
that will be in effect when the differences are expected to reverse. Income taxes have not been accrued at the GARMIN level for
the unremitted earnings of GII or GEL totaling approximately $96,948 and $77,544 at December 29, 2001 and December 30, 2000,
respectively, because such earnings are intended to be reinvested in these subsidiaries indefinitely.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those estimates.
Concentration of Credit Risk
The Company grants credit to certain customers who meet the Company’s pre-established credit requirements. Generally, the
Company does not require security when trade credit is granted to customers. Credit losses are provided for in the Company’s
consolidated financial statements and consistently have been within management’s expectations.
Revenue Recognition
The Company recognizes revenue from product sales when the product is shipped to the customer and title has transferred. The
Company assumes no remaining significant obligations associated with the product sale other than that related to its warranty programs
discussed below. Shipping and handling costs are included in cost of sales in the accompanying consolidated financial statements.
Product Warranty
The Company provides for estimated warranty costs at the time of sale. The warranty period is generally for one year from date
of shipment with the exception of certain aviation products for which the warranty period is two years from the date of installation.
Sales Programs
The Company provides certain monthly and quarterly incentives for its dealers based on various factors including dealer purchasing
volume and growth. Additionally, the Company provides rebates to end users on certain products. Estimated rebates and incentives
payable to distributors are regularly reviewed and recorded as accrued expenses on a monthly basis. These rebates and incentives
are recorded as reductions to net sales in the accompanying consolidated statements of income.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising expense charged to operations amounted to approximately
$14,714, $11,529, and $8,574 for the years ended December 29, 2001, December 30, 2000, and December 25, 1999, respectively.
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