Henry Schein 2012 Annual Report Download - page 75
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Please find page 75 of the 2012 Henry Schein annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(in thousands, except per share data)
65
Note 1 – Significant Accounting Policies – (Continued)
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 multiple element arrangements, and the related deferral of such revenue (which is
insignificant to our financial statements), is recognized as follows. When we sell software products together with
related services (i.e., training and technical support) we allocate revenue to the delivered elements using the
residual method, based upon vendor-specific objective evidence (“VSOE”) of the fair value of the undelivered
elements, or defer it until such time as vendor-specific evidence of fair value is obtained. Multiple element
arrangements that include elements that are not considered software consist primarily of equipment and the related
installation service. Effective December 26, 2010 we allocate revenue for such arrangements based on the relative
selling prices of the elements applying the following hierarchy: first VSOE, then third-party evidence (“TPE”) of
selling price if VSOE is not available, and finally our estimate of the selling price if neither VSOE nor TPE is
available. VSOE exists when we sell the deliverables separately and represents the actual price charged by us for
each deliverable. Estimated selling price reflects our best estimate of what the selling prices of each deliverable
would be if it were sold regularly on a standalone basis taking into consideration the cost structure of our business,
technical skill required, customer location and other market conditions. Each element that has standalone value is
accounted for as a separate unit of accounting. Revenue allocated to each unit of accounting is recognized when the
service is provided or the product is delivered.
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.
Cash and Cash Equivalents
We consider all highly liquid short-term investments with an original maturity of three months or less to be
cash equivalents. Due to the short-term maturity of such investments, the carrying amounts are a reasonable
estimate of fair value. Outstanding checks in excess of funds on deposit of $59.4 million and $49.1 million,
primarily related to payments for inventory, were classified as accounts payable as of December 29, 2012 and
December 31, 2011.
Available-for-sale Securities
As of December 29, 2012, we have approximately $3.3 million ($2.8 million net of temporary impairments)
invested in auction-rate securities (“ARS”). These investments are backed by student loans (backed by the federal
government) and investments in closed-end municipal bond funds, which are included as part of Investments and
other within our consolidated balance sheets. ARS are publicly issued securities that represent long-term
investments, typically 10-30 years, in which interest rates had reset periodically (typically every 7, 28 or 35 days)
through a “dutch auction” process.
We determine cost of investments in available-for-sale securities on a specific identification basis. As of
December 29, 2012 and December 31, 2011, unrealized losses, which are recorded in Accumulated other
comprehensive income within the equity section of our consolidated balance sheets, on our available-for-sale
securities totaled $0.5 million and $1.2 million, respectively. Gross realized gains and losses were immaterial in all
periods presented.