Logitech 2014 Annual Report Download - page 209

(2) Property Plant and Equipment Capitalization Threshold Convention—Historically, the Company’s practice
was to apply an accounting convention to immediately expense the entire purchase price of all property and
equipment that cost less than certain dollar thresholds instead of capitalizing and depreciating such property
and equipment over its useful life. The Company determined that the thresholds utilized were incorrect and
resulted in a cumulative understatement of retained earnings as of March 31, 2009 of $7.5 million, which
the Company corrected through an increase to opening retained earnings as of that date. The impact of the
correction also resulted in an increase in cost of goods sold and operating expense and decrease in operating
income of $1.6 million in fiscal year 2010 and a decrease in cost of goods sold and operating expense and
increase in operating income of $2.4 million in fiscal year 2011.
(3) Settlement Accrual—The Company determined that it incorrectly recorded a release of a legal settlement
accrual of $1.3 million in the first quarter of fiscal year 2012 instead of in the fourth quarter of fiscal year
2011 as the contingency was resolved before the Annual Report on Form 10-K of fiscal year 2011 was issued.
The impact of this adjustment was an increase in operating income by $1.3 million in fiscal year 2011 and a
corresponding decrease of operating income for the same amount in fiscal year 2012.
(4) Other Adjustments—The Company is also correcting a number of other immaterial errors which were
previously recorded in prior periods as out-of-period adjustments and are now being revised to report them
in the correct period as well as to correct other immaterial misstatements that were previously uncorrected.
Among the corrections, the Company is correcting its accrual for workers compensation, liability for certain
of its defined benefit pension plans, balance sheet reclassifications and tax impact of the above adjustments.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
Market risk represents the potential for loss due to adverse changes in the fair value of financial instruments.
As a global concern, we face exposure to adverse movements in foreign currency exchange rates and interest rates.
These exposures may change over time as business practices evolve and could have a material adverse impact on
our financial results.
Foreign Currency Exchange Rates
We are exposed to foreign currency exchange rate risk as we transact business in multiple foreign currencies,
including exposure related to anticipated sales, anticipated purchases and assets and liabilities denominated in
currencies other than the U.S. Dollar. Logitech transacts business in over 30 currencies worldwide, of which the
most significant to operations are the Euro, Chinese Renminbi, Australian Dollar, Taiwanese Dollar, British Pound,
Canadian Dollar, Japanese Yen and Mexican Peso. The functional currency of our operations is primarily the U.S.
Dollar. To a lesser extent, certain operations use the Swiss Franc, or the local currency of the country as their
functional currencies. Accordingly, unrealized foreign currency gains or losses resulting from the translation of
net assets or liabilities denominated in foreign currencies to the U.S. Dollar are accumulated in the cumulative
translation adjustment component of other comprehensive (loss) in shareholders’ equity.
ANNUAl REPORT
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