Ingram Micro 2010 Annual Report Download - page 34

the financial statement date, and reported amounts of revenue and expenses during the reporting period. On an
ongoing basis, we review and evaluate our estimates and assumptions, including, but not limited to, those that relate
to trade accounts receivable; vendor programs; inventory; goodwill, intangible and other long-lived assets; income
taxes; and contingencies and litigation. Our estimates are based on our historical experience and a variety of other
assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for
making our judgment about the carrying values of assets and liabilities that are not readily available from other
sources. Although we believe our estimates, judgments and assumptions are appropriate and reasonable based upon
available information, these assessments are subject to a wide range of sensitivity. Therefore, actual results could
differ from these estimates.
We believe the following critical accounting policies are affected by our judgments, estimates and/or
assumptions used in the preparation of our consolidated financial statements.
•Trade Accounts Receivable — We provide allowances for doubtful accounts on our trade accounts receiv-
able for estimated losses resulting from the inability of our customers to make required payments. Changes
in the financial condition of our customers or other unanticipated events, which may affect their ability to
make payments, could result in charges for additional allowances exceeding our expectations. Our estimates
are influenced by the following considerations: the large number of customers and their dispersion across
wide geographic areas; a continuing credit evaluation of our customers’ financial condition; aging of trade
accounts receivable, individually and in the aggregate; credit insurance coverage; the value and adequacy of
collateral received from our customers in certain circumstances; our historical loss experience; and changes
in credit risk and capital availability of our customers resulting from economic conditions. From
time-to-time, we have had one customer account for 10% or more of our consolidated trade accounts
receivable, although no single customer has accounted for 10% or more of our consolidated net sales.
•Vendor Programs — We receive funds from vendors for price protection, product return privileges, product
rebates, marketing/promotion, infrastructure reimbursement and meet-competition programs, which are
recorded as adjustments to product costs, revenue, or SG&A expenses according to the nature of the
program. Some of these programs may extend over more than one quarterly reporting period. We accrue
rebates or other vendor incentives as earned based on sales of qualifying products or as services are provided
in accordance with the terms of the related program. Actual rebates may vary based on volume or other sales
achievement levels, which could result in an increase or reduction in the estimated amounts previously
accrued. We also provide reserves for receivables on vendor programs for estimated losses resulting from
vendors’ inability to pay or rejections of claims by vendors.
•Inventory — Our inventory levels are based on our projections of future demand and market conditions. Any
sudden decline in demand and/or rapid product improvements and technological changes could cause us to
have excess and/or obsolete inventory. On an ongoing basis, we review for estimated excess or obsolete
inventory and write down our inventory to its estimated net realizable value based upon our forecasts of
future demand and market conditions. If actual market conditions are less favorable than our forecasts,
additional inventory write-downs may be required. Our estimates are influenced by the following consid-
erations: protection from loss in value of inventory under our vendor agreements; our rights to return
inventory to vendors in accordance with contractual stipulations; aging of inventory; changes in demand due
to the economic environment; and rapid product improvements and technological changes.
•Goodwill, Intangible Assets and Other Long-Lived Assets — We evaluate goodwill and other intangible
assets in accordance with the provisions issued by the Financial Accounting Standards Board, or the FASB.
In the fourth quarter of 2008 consistent with the drastic decline in the capital markets in general at that time,
we experienced a similar decline in the market value of our common stock. As a result, our market
capitalization was significantly lower than the book value of our company. We conducted goodwill
impairment tests in each of our regional reporting units that had goodwill during the fourth quarter of
2008, which coincided with the timing of our normal annual impairment test. In performing this test, we,
among other things, consulted an independent valuation advisor. Based on the results of these tests,
management concluded that the goodwill of each of the North America, EMEA and Asia Pacific reporting
units was fully impaired and recorded a charge of $742,653 in the fourth quarter of 2008, which was made
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