Logitech 2012 Annual Report Download - page 235

LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Advertising Costs
Advertising costs are expensed as incurred. Amounts charged to marketing and selling expenses were
$158.1 million, $184.8 million and $118.1 million in fiscal years 2012, 2011 and 2010. Advertising costs reimbursed
by the Company to a customer must have an identifiable benefit and an estimable fair value in order to be classified
as an operating expense. If these criteria are not met, the cost is classified as a reduction of revenue.
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, but is exposed to credit risk in the
event of default by financial institutions to the extent that cash balances with individual financial institutions are
in excess of amounts that are insured.
The Company sells to large OEMs, distributors and key retailers and, as a result, maintains individually
significant receivable balances with such customers. As of March 31, 2012 and 2011, one customer group
represented 14% and 13% of total accounts receivable. Typical payment terms require customers to pay for product
sales generally within 30 to 60 days; however terms may vary by customer type, by country and by selling season.
Extended payment terms are sometimes offered to a limited number of customers during the second and third fiscal
quarters. The Company does not modify payment terms on existing receivables.
The Company’s OEM customers tend to be well-capitalized, multi-national companies, while distributors
and key retailers may be less well-capitalized. The Company manages its accounts receivable credit risk through
ongoing credit evaluation of its customers’ financial condition. The Company generally does not require collateral
from its customers.
Allowances for Doubtful Accounts
Allowances for doubtful accounts are maintained for estimated losses resulting from the inability of the
Company’s customers to make required payments. The allowances are based on the Company’s regular assessment
of the credit worthiness and financial condition of specific customers, as well as its historical experience with bad
debts and customer deductions, receivables aging, current economic trends, geographic or country-specific risks
and the financial condition of its distribution channels.
Inventories
Inventories are stated at the lower of cost or market. Cost is computed on a first-in, first-out basis. The
Company records write-downs of inventories which are obsolete or in excess of anticipated demand or market value
based on a consideration of marketability and product life cycle stage, product development plans, component cost
trends, demand forecasts, historical sales, and assumptions about future demand and market conditions.
Note 2 — Summary of Significant Accounting Policies (Continued)
ANNUAL REPORT
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