Logitech 2007 Annual Report Download - page 143

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LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Defined Benefit Plans
Two of the Company’s subsidiaries sponsor noncontributory defined benefit pension plans covering
substantially all of their employees. Retirement benefits are provided based on employees’ years of service and
earnings, or in accordance with applicable employee benefit regulations. The Company’s practice is to fund
amounts sufficient to meet the requirements set forth in the applicable employee benefit and tax regulations.
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, “Employers’
Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106 and 132(R)” (“SFAS 158”). This standard requires employers to recognize the underfunded or
overfunded status of defined benefit pension and postretirement plans as an asset or liability in its statement of
financial position, and recognize changes in the funded status in the year in which the changes occur through
accumulated other comprehensive income, which is a component of stockholders’ equity. This standard also
requires a change in the measurement of a plan’s assets and benefit obligations as of the end date of the
employer’s fiscal year. SFAS 158 is effective for fiscal years ending after December 15, 2006, except for the
measurement date provisions, which are effective for fiscal years ending after December 15, 2008. As a result of
the application of SFAS 158 as of March 31, 2007, the Company recognized the net underfunded status of these
plans, resulting in an increase to net pension liability of $3.9 million, an increase to deferred tax assets of
$0.9 million, additional expense of $0.3 million, and a corresponding adjustment to accumulated other
comprehensive loss of $2.7 million. The Company does not expect the measurement date provisions to have a
significant impact on the Company’s consolidated financial statements.
Net pension costs for fiscal years 2007, 2006 and 2005 were $3.0 million, $2.9 million and $3.3 million.
The net pension liability recognized at March 31, 2007 and 2006 was $7.4 million and $4.5 million. If SFAS 158
had been applicable for fiscal year 2006, the net pension liability recognized would have been $6.8 million. As of
the plans’ measurement date of March 31, the fair value of plan assets was $27.4 million and $22.3 million in
2007 and 2006, the projected benefit obligation was $34.8 million and $29.1 million and the accumulated benefit
obligation was $21.6 million and $20.1 million.
Deferred Compensation Plan
One of the Company’s subsidiaries offers a management deferred compensation plan which permits eligible
employees to make 100%-vested salary and incentive compensation deferrals within established limits, which are
invested in Company-owned life insurance contracts held in a Rabbi Trust. The Company does not make
contributions to the plan. The cash surrender value of the insurance contracts was approximately $10.9 million
and $9.4 million at March 31, 2007 and 2006 and was included in other assets. Expenses and gains or losses
related to the insurance contracts are included in other income, net and have not been significant to date. The
unsecured obligation to pay the compensation deferred, adjusted to reflect the positive or negative performance
of investment measurement options selected by each participant, was approximately $12.3 million and
$10.7 million at March 31, 2007 and 2006 and was included in other liabilities. The additional compensation
expenses related to investment performance have not been significant to date.
Note 14 — Income Taxes
The Company is incorporated in Switzerland but operates in various countries with differing tax laws and
rates. Further, a portion of the Company’s income before taxes and the provision for income taxes are generated
outside of Switzerland. The portion of the Company’s income before taxes for fiscal years 2007, 2006 and 2005
subject to foreign income taxes was $113.8 million, $92.2 million, and $58.2 million. Consequently, the
weighted average expected tax rate may vary from period to period to reflect the generation of taxable income in
different tax jurisdictions.
F-25
CG