Logitech 2003 Annual Report Download - page 157

F-8
LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Foreign Currency
The functional currencies of the Company's operations are primarily the U.S. dollar, and to a lesser extent, the
Euro, Swiss franc, Taiwanese dollar, and Japanese yen. The financial statements of the Company's
subsidiarieswhose functional currency is other than the U.S. dollar are translated to U.S. dollars using period-end
rates of exchange for assets and liabilities and using monthly rates for net sales and expenses. Translation gains and
losses are deferred and included in the cumulative translation adjustment component of shareholders' equity. Gains
and losses arising from transactions denominated in currencies other than a subsidiary's functional currency are
reflected in other income (expense), net in the statements of income.
Cash Equivalents
The Company considers all highly liquid instruments purchased with an original maturity of three months or less
to be cash equivalents.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of
cash and cash equivalents and accounts receivable. The Company maintains cash and cash equivalents with various
financial institutions to limit exposure with any one financial institution.
The Company sells to large OEMs, distributors and high volume resellers and, as a result, maintains individually
significant receivable balances with large customers. At March 31, 2003, one customer represented 18% of total
accounts receivable and at March 31, 2002, one customer represented 10% of total accounts receivable. The
Company's OEM customers tend to be well-capitalized, multi-national companies, while retail customers may be less
well capitalized. The Company controls its accounts receivable credit risk through ongoing credit evaluation of its
customers’ financial condition and by purchasing credit insurance on European retail accounts receivable. The
Company generally does not require collateral from its customers.
Accounts Receivable
Accounts receivable are stated net of doubtful accounts. The Company estimates the uncollectability of the
accounts receivable balance and maintains allowances for estimated losses. Management analyzes accounts
receivable, historical bad debts, receivable aging, customer credit-worthiness and current economic trends when
evaluating the adequacy of the allowance for doubtful accounts.
Inventories
Inventories are stated at the lower of cost or market. Cost is computed on a first-in, first-out basis. Provisions are
made for estimated excess and obsolete inventory as well as declines in marketability based upon technology trends,
our plans for the products and assumptions about future demand and market conditions.
Investments
Investments in companies in which Logitech owns between 20% and 50%, and does not control, are accounted
for using the equity method. Under the equity method, the Company adjusts its carrying value to recognize its share
of results of operations. Investments less than 20% owned are carried at cost less any decrease in value deemed to be
other than temporary in nature. At March 31, 2002, the Company owned an investment in a marketable equity
security that was classified as “available-for-sale”. The Company carried this investment at market value and
recorded increases or decreases in market value as a component of shareholders’ equity.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Additions and improvements are capitalized, whereas
maintenance and repairs are expensed as incurred. The Company capitalizes the cost of software developed for
internal use in connection with major projects. Costs incurred during the feasibility stage are expensed, whereas costs
incurred during the application development stage are capitalized. Depreciation is provided using the straight-line
method over estimated useful lives of five to 25 years for plant and buildings, one to five years for equipment and