Garmin 2008 Annual Report Download - page 61

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demand and market conditions. If actual market conditions are less favorable than those projected by management,
additional inventory write-downs may be required.
Investments
Investments are classified as available for sale and recorded at fair value, and unrealized investment gains
and losses are reflected in stockholders’ equity. Investment income is recorded when earned, and capital gains and
losses are recognized when investments are sold. Fair value of investments in auction rate securities are valued
using third party estimates which followed an income approach valuation methodology. Investments are reviewed
periodically to determine if they have suffered an impairment of value that is considered other than temporary. If
investments are determined to be impaired, a capital loss is recognized at the date of determination.
Testing for impairment of investments also requires significant management judgment. The identification
of potentially impaired investments, the determination of their fair value and the assessment of whether any decline
in value is other than temporary are the key judgment elements. The discovery of new information and the passage
of time can significantly change these judgments. Revisions of impairment judgments are made when new
information becomes known, and any resulting impairment adjustments are made at that time. The economic
environment and volatility of securities markets increase the difficulty of determining fair value and assessing
investment impairment.
Income Taxes
Garmin provides deferred tax assets and liabilities based on the difference between the tax basis 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. While no valuation allowance has been
recorded, it is Garmin’s policy to record a valuation allowance to reduce its deferred tax assets to an amount that it
believes is more likely than not to be realized. While Garmin has considered future taxable income and ongoing
prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event Garmin
were to determine that it would not be able to realize all or part of its net deferred tax assets in the future, an
adjustment to the deferred tax assets would be charged to income in the period such determination is made.
Likewise, should Garmin determine that it would be able to realize its deferred tax assets in the future in excess of
its net recorded amount, an adjustment to the deferred tax assets would increase income in the period such
determination is made.
In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of
complex tax regulations. We recognize liabilities for tax audit issues in the U.S. and other tax jurisdictions based on
our estimate of whether, and the extent to which, additional taxes will be due. If payment of these amounts
ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the
period when we determine the liabilities are no longer necessary. If our estimate of tax liabilities proves to be less
than the ultimate assessment, a further charge to expense would result.
Stock Based Compensation
Garmin awards stock options, stock appreciation rights (“SARs”), restricted stock units (“RSUs”) and/or
performance shares each year as part of Garmin’s compensation package for employees. Employees with certain
levels of responsibility within Garmin are eligible for stock options, SAR grants, RSU grants and/or performance
shares but the granting of options, SARs, RSUs and/or performance shares is at the discretion of the Compensation
Committee of the Board of Directors and is not a contractual obligation. Stock compensation plans are discussed in
detail in Note 9 of the Notes to Consolidated Financial Statements.