Logitech 2013 Annual Report Download - page 164

LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fiscal Year
The Company’s fiscal year ends on March 31. Interim quarters are thirteen-week periods, each ending on a
Friday. For purposes of presentation, the Company has indicated its quarterly periods as ending on the month end.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make
judgments, estimates and assumptions that affect reported amounts of assets, liabilities, net sales and expenses,
and the disclosure of contingent assets and liabilities. Examples of significant estimates and assumptions made by
management involve the fair value of goodwill, accruals for customer programs, inventory valuation, and valuation
allowances for deferred tax assets. Although these estimates are based on management’s best knowledge of current
events and actions that may impact the Company in the future, actual results could differ from those estimates.
Foreign Currencies
The functional currency of the Company’s operations is primarily the U.S. dollar. To a lesser extent, certain
operations use the euro, Chinese renminbi, Swiss franc, or other local currencies of the country as their functional
currencies. The financial statements of the Company’s subsidiaries whose 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 monthly
average rates for revenues and expenses. Cumulative translation gains and losses are included as a component of
shareholders’ equity in accumulated other comprehensive income (loss). Gains and losses arising from transactions
denominated in currencies other than a subsidiary’s functional currency are reported in other income (expense), net
in the consolidated statements of operations.
Revenue Recognition
Revenues are recognized when all of the following criteria are met:
• evidence of an arrangement exists between the Company and the customer;
• delivery has occurred and title and risk of loss transfer to the customer;
• the price of the product is fixed or determinable; and
• collectibility of the receivable is reasonably assured.
For sales of most hardware peripherals products and hardware bundled with software incidental to its
functionality, these criteria are met at the time delivery has occurred and title and risk of loss have transferred to
the customer.
The Company’s video conferencing segment has some multiple-deliverable revenue arrangements that include
both undelivered software elements and hardware with software essential to its functionality. The Company uses
the following hierarchy to determine the relative selling price for allocating revenue to the deliverables: (i) VSOE
(vendor specific objective evidence) of fair value, if available; (ii) TPE (third party evidence), if VSOE is not
available; or (iii) ESP (estimated selling price), if neither VSOE or TPE is available. Management judgment must be
used to determine the appropriate deliverables and associated relative selling prices. The Company has identified
Logitech Revue, discontinued in fiscal year 2013, and the LifeSize video conferencing products as products sold
with software components that qualify as multiple-deliverable revenue arrangements.
Note 2 — Summary of Significant Accounting Policies (Continued)
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