Garmin 2009 Annual Report Download - page 64

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includesarealizedgainof$21.5millionduetothestrengtheningoftheEurobetweenthedatewepurchased
sharesinTeleAtlasN.V.inOctober2007andthetenderofsharesinFebruary,March,andJune2008.Todate,we
havenotenteredintohedgingtransactionswiththeEuro,theBritishPoundSterling,ortheTaiwanDollar,andwe
donotcurrentlyplantoutilizehedgingtransactionsinthefuture.
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CriticalAccountingPoliciesandEstimates

General
Garmin’sdiscussionandanalysisofitsfinancialconditionandresultsofoperationsarebasedupon
Garmin’sconsolidatedfinancialstatements,whichhavebeenpreparedinaccordancewithaccountingprinciples
generallyacceptedintheUnitedStates.ThepresentationofthesefinancialstatementsrequiresGarmintomake
estimatesandjudgmentsthataffectthereportedamountsofassets,liabilities,revenuesandexpenses,and
relateddisclosureofcontingentassetsandliabilities.Onanon‐goingbasis,Garminevaluatesitsestimates,
includingthoserelatedtocustomersalesprogramsandincentives,productreturns,baddebts,inventories,
investments,intangibleassets,incometaxes,warrantyobligations,andcontingenciesandlitigation.Garminbases
itsestimatesonhistoricalexperienceandonvariousotherassumptionsthatarebelievedtobereasonableunder
thecircumstances,theresultsofwhichformthebasisformakingjudgmentsaboutthecarryingvalueofassetsand
liabilitiesthatarenotreadilyapparentfromothersources.Actualresultsmaydifferfromtheseestimatesunder
differentassumptionsorconditions.
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RevenueRecognition
Garminrecognizesrevenuewhenpersuasiveevidenceofanarrangementexists,deliveryhas
occurred,thesalespriceisfixedordeterminable,andcollectionisprobable. ForthelargemajorityofGarmin’s
sales,thesecriteriaaremetonceproducthasshippedandtitleandriskoflosshavetransferredtothecustomer.
TheCompanyrecognizesrevenuefromthesaleofhardwareproductsandsoftwarebundledwithhardwarethatis
essentialtothefunctionalityofthehardwareinaccordancewithgeneralrevenuerecognitionaccounting
guidance.TheCompanyrecognizesrevenueinaccordancewithindustryspecificsoftwareaccountingguidancefor
standalonesalesofsoftwareproductsandsalesofsoftwarebundledwithhardwarenotessentialtothe
functionalityofthehardware.TheCompanygenerallydoesnotofferspecifiedorunspecifiedupgraderightstoits
customersinconnectionwithsoftwaresales.

GarminintroducednüMapsLifetime™inJanuary2009,whichisasinglefeeprogramthat,subjecttothe
program’stermsandconditions,enablescustomerstodownloadthelatestmapandpointofinterestinformation
everyquarterfortheusefullifeoftheirPND. TherevenueandassociatedcostofroyaltiesforsalesofnüMaps
Lifetime™productsaredeferredatthetimeofsaleandrecognizedratablyonastraight‐linebasisoverthe
currentlyestimatedthree‐yearlifeoftheproducts.

Formulti‐elementarrangementsthatincludetangibleproductsthatcontainsoftwarethatisessentialto
thetangibleproduct’sfunctionalityandundeliveredsoftwareelementsthatrelatetothetangibleproduct’s
essentialsoftware,theCompanyallocatesrevenuetoalldeliverablesbasedontheirrelativesellingprices.Insuch
circumstances,thenewaccountingprinciplesestablishahierarchytodeterminethesellingpricetobeusedfor
allocatingrevenuetodeliverablesasfollows:(i)vendor‐specificobjectiveevidenceoffairvalue(“VSOE”),(ii)third‐
partyevidenceofsellingprice(“TPE”),and(iii)bestestimateofthesellingprice(“ESP”).VSOEgenerallyexistsonly
whentheCompanysellsthedeliverableseparatelyandisthepriceactuallychargedbytheCompanyforthat
deliverable.

In2009,Garminintroducedthenüvi1690,apremiumPNDwithabuilt‐inwirelessmodulethatlets
customersaccessGarmin’snüLink!™service,whichprovidesdirectlinkstocertainonlineinformation. The
Companyhasidentifiedtwodeliverablescontainedinarrangementsinvolvingthesaleofthenüvi1690.Thefirst