Logitech 2004 Annual Report Download - page 106

LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
value based on a consideration of product lifecycle stage, technology trends, product development plans,
component cost trends and assumptions about future demand and market conditions.
Investments
Investments in companies in which Logitech owns less than 20% are carried at cost adjusted for any
decrease in value deemed to be other than temporary in nature.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Additions and improvements are capitalized, and
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.
With the exception of tooling, depreciation is provided using the straight-line method. Plant and buildings
are depreciated over estimated useful lives from ten to twenty five years, equipment over useful lives from three
to five years, software development over useful lives from three to five years and leasehold improvements over
the life of the lease, not to exceed five years. Tooling is depreciated over the forecasted life of the tool, not to
exceed one year from the time it is placed into production. Depreciation for tooling is calculated based on the
forecasted production volume and adjusted quarterly based on actual production. When property and equipment
is retired or otherwise disposed of, the cost and accumulated depreciation are relieved from the accounts and the
net gain or loss is included in the determination of net income.
Intangible Assets
The Company’s intangible assets principally include goodwill, acquired technology and trademarks.
Intangible assets with finite lives, which include acquired technology and trademarks, are recorded at cost and
amortized on the straight-line method over their useful lives ranging from four to five years. Intangible assets
with indefinite lives, which include goodwill, are recorded at cost and evaluated at least annually for impairment.
Impairment of Long-Lived Assets
The Company reviews long-lived assets, such as investments, property and equipment, and intangible assets,
for impairment whenever events indicate that the carrying amounts might not be recoverable. Recoverability of
investments, property and equipment, and other intangible assets is measured by comparing the projected
undiscounted net cash flows associated with those assets to their carrying values. If an asset is considered
impaired, it is written down to fair value, which is determined based on the asset’s projected discounted cash
flows or appraised value, depending on the nature of the asset. Goodwill is evaluated for impairment at least
annually.
Income Taxes
The Company provides for income taxes using the liability method, which requires that deferred tax assets
and liabilities be recognized for the expected future tax consequences of temporary differences resulting from
differing treatment of items for tax and accounting purposes. In estimating future tax consequences, expected
future events are taken into consideration, with the exception of potential tax law or tax rate changes.
Fair Value of Financial Instruments
The carrying value of certain of the Company’s financial instruments, including cash and cash equivalents
and accounts receivable, accounts payable and accrued liabilities, short-term debt and current maturities of long-
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