Henry Schein 2009 Annual Report Download - page 56

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44
We finance our business to provide adequate funding for at least 12 months. Funding requirements are
based on forecasted profitability and working capital needs, which, on occasion, may change. Consequently,
we may change our funding structure to reflect any new requirements.
We believe that our cash and cash equivalents, our ability to access private debt markets and public equity
markets, and our available funds under existing credit facilities provide us with sufficient liquidity to meet our
currently foreseeable short-term and long-term capital needs. We have no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent
assets and liabilities. We base our estimates on historical data, when available, experience, industry and
market trends, and on various other assumptions that are believed to be reasonable under the circumstances,
the combined results of which form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. However, by their nature, estimates are subject to
various assumptions and uncertainties. Reported results are therefore sensitive to any changes in our
assumptions, judgments and estimates, including the possibility of obtaining materially different results if
different assumptions were to be applied.
We believe that the following critical accounting policies, which have been discussed with our audit
committee, affect the significant estimates and judgments used in the preparation of our financial statements:
Revenue Recognition
We generate revenue from the sale of dental, medical and animal health consumable products, as well as
equipment, software products and services and other sources. Provisions for discounts, rebates to customers,
customer returns and other contra-revenue adjustments are recorded based upon historical data and estimates
and are provided for in the period in which the related sales are recognized.
Revenue derived from the sale of consumable products is recognized when products are shipped to
customers. Such sales typically entail high-volume, low-dollar orders shipped using third-party common
carriers. We believe that the shipment date is the most appropriate point in time indicating the completion of
the earnings process because we have no post-shipment obligations, the product price is fixed and
determinable, collection of the resulting receivable is probable and product returns are reasonably estimable.
Revenue derived from the sale of equipment is recognized when products are delivered to customers.
Such sales typically entail scheduled deliveries of large equipment primarily by equipment service
technicians. Some equipment sales require minimal installation, which is typically completed at the time of
delivery.
Revenue derived from the sale of software products is recognized when products are shipped to
customers. Such software is generally installed by customers and does not require extensive training due to
the nature of its design. Revenue derived from post-contract customer support for software, including annual
support and/or training, is recognized over the period in which the services are provided.
Revenue derived from the sale of products consisting of multiple elements (i.e., hardware, software,
installation, training and technical support) is allocated to the various elements based upon vendor-specific
objective evidence of fair value.
Revenue derived from other sources including freight charges, equipment repairs and financial services, is
recognized when the related product revenue is recognized or when the services are provided.