Harley Davidson 2012 Annual Report Download - page 60

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60
HARLEY-DAVIDSON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation – The consolidated financial statements include the accounts of
Harley-Davidson, Inc. and its wholly-owned subsidiaries (the Company), including the accounts of the groups of companies
doing business as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). In addition,
certain variable interest entities (VIEs) related to secured financing are consolidated as the Company is the primary beneficiary.
All intercompany accounts and transactions are eliminated.
All of the Company’s subsidiaries are wholly owned and are included in the consolidated financial statements.
Substantially all of the Company’s international subsidiaries use their respective local currency as their functional currency.
Assets and liabilities of international subsidiaries have been translated at period-end exchange rates, and revenues and expenses
have been translated using average exchange rates for the period.
The Company operates in two principal business segments: Motorcycles & Related Products (Motorcycles) and Financial
Services (Financial Services).
On October 15, 2009, the Company announced its intent to divest MV Agusta (MV) and completed the sale of MV on
August 6, 2010. MV is presented as a discontinued operation for all periods.
Use of Estimates – The preparation of financial statements in conformity with U.S. generally accepted accounting
principles (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents – The Company considers all highly liquid investments with a maturity of three months or
less when purchased to be cash equivalents.
Marketable Securities – The Company’s marketable securities consisted of the following at December 31 (in thousands):
2012 2011
Available-for-sale:
Corporate bonds $ 135,634 $ 153,380
$ 135,634 $ 153,380
The Company’s available-for-sale securities are carried at fair value with any unrealized gains or losses reported in other
comprehensive income. During 2012 and 2011, the Company recognized gross unrealized gains of $0.6 million and $0.7
million, respectively, or gains of $0.4 million and $0.5 million, net of tax, respectively, to adjust amortized cost to fair value.
The marketable securities have contractual maturities that generally come due over the next 12 to 36 months.
Accounts Receivable – The Company’s motorcycles and related products are sold to independent dealers and distributors
outside the U.S. and Canada generally on open account and the resulting receivables are included in accounts receivable in the
Company’s consolidated balance sheets. The allowance for doubtful accounts deducted from total accounts receivable was $5.0
million as of December 31, 2012 and 2011. Accounts receivable are written down once management determines that the
specific customer does not have the ability to repay the balance in full. The Company’s sales of motorcycles and related
products in the U.S. and Canada are financed by the purchasing dealers or distributors through HDFS and the related
receivables are included in finance receivables in the consolidated balance sheets.
Reclassifications - The Company has adjusted the format of its Consolidated Balance Sheets to present assets and
liabilities held by consolidated VIEs in a table below the Consolidated Balance Sheets versus the previous format which
included the assets and liabilities as separate line items within the Consolidated Balance sheets. The assets and liabilities held
by consolidated VIEs are now included in the Consolidated Balance Sheets within finance receivables, net, restricted cash,
other current assets, current portion of long-term debt and long-term debt. All periods presented have been adjusted.
Finance Receivables, Net – Finance receivables include both retail and wholesale finance receivables, net, including
amounts held by VIEs. Finance receivables are recorded in the financial statements at historical cost net of an allowance for
credit losses. The provision for credit losses on finance receivables is charged to earnings in amounts sufficient to maintain the
allowance for credit losses at a level that is adequate to cover losses of principal inherent in the existing portfolio. Portions of
the allowance for credit losses are specified to cover estimated losses on finance receivables specifically identified for