Plantronics 2008 Annual Report Download - page 51

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Reductions to revenue for expected and actual payments to resellers for volume rebates and pricing protection are based on actual
expenses incurred during the period, estimates for what is due to resellers for estimated credits earned during the period and any
adjustments for credits based on actual activity. If the actual payments exceed management’s estimates, this could result in an adverse
impact on our revenues. Since management has historically been able to reliably estimate the amount of allowances required for future
price adjustments and product returns, we recognize revenue, net of projected allowances, upon recognition of the related sale. In
situations where management is unable to reliably estimate the amount of future price adjustments and product returns, we defer
recognition of the revenue until the right to future price adjustments and product returns lapses, and we are no longer under any
obligation to reduce the price or accept the return of the product.
If market conditions warrant, we may take action to stimulate demand, which could include increasing promotional programs,
decreasing prices, or increasing discounts. Such actions could result in incremental reductions to revenue and margins at the time such
incentives are offered. To the extent that we reduce pricing, we may incur reductions to revenue for price protection based on
management’s estimate of inventory in the channel that is subject to such pricing actions.
Investments
The goals of our investment policy, in order of priority, are preservation of capital, maintenance of liquidity, diversification and
maximization of after-tax investment income. Investments are limited to investment grade securities with limitations by policy on the
percent of the total portfolio invested in any one issue. All of the our investments are held in the our name at a limited number of
major financial institutions. Investments with remaining maturities greater than one year and Auction Rate Securities (“ARS”) that we
do not have the ability and intent to liquidate within the next twelve months are classified as long-term investments. Investments
classified as short-term are carried at fair value based upon quoted market prices at the end of the reporting period. Investments
classified as long-term are carried at fair value based on a discounted cash flow model. All investments are classified as available-for-
sale with unrealized gains and losses recorded as a separate component of accumulated other comprehensive income (loss) in
stockholders’ equity. The specific identification method is used to determine the cost of securities disposed of, with realized gains
and losses reflected in interest and other income, net.
Impairment on investments is determined pursuant to SFAS No. 115, “Accounting for Certain Investments in Debt and Equity
Securities”, and related guidance issued by the FASB and SEC in order to determine the classification of the impairment as
“temporary” or “other-than-temporary”. A temporary impairment charge results in an unrealized loss being recorded in the other
comprehensive income (loss) component of stockholders’ equity. Such an unrealized loss does not affect net income for the applicable
accounting period. An other-than-temporary impairment charge is recorded as a realized loss in the consolidated statement of
operations and reduces net income for the applicable accounting period. In evaluating the impairment of any individual ARS, we
classified such impairment as temporary or other-than-temporary. The differentiating factors between temporary and other-than-
temporary impairment are primarily the length of the time and the extent to which the market value has been less than cost, the
financial condition and near-term prospects of the issuer and the intent and ability of Plantronics to retain its investment in the issuer
for a period of time sufficient to allow for any anticipated recovery in market value.
Allowance for Doubtful Accounts
We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required
payments. We regularly perform credit evaluations of our customers’ financial condition and consider factors such as historical
experience, credit quality, age of the accounts receivable balances, and geographic or country-specific risks and economic conditions
that may affect a customers' ability to pay. The allowance for doubtful accounts is reviewed quarterly and adjusted if necessary based
on management’s assessments of customer’s ability to pay. If the financial condition of customers should deteriorate, additional
allowances may be required, which could have an adverse impact on operating expenses.
Inventory and Related Reserves
Inventories are stated at the lower of cost or market. Cost is computed using standard cost, which approximates actual cost, on a first-
in, first-out basis.
Costs such as idle facility expense, double freight, and re-handling costs are accounted for as current-period charges. Additionally, we
allocate fixed production overheads to the costs of conversion based on the normal capacity of the production facilities. All shipping
and handling costs incurred in connection with the sale of products are included in the cost of revenues.
If we believe that demand no longer allows us to sell our inventory above cost or at all, we write down that inventory to market or
write-off excess and obsolete inventories. Write-downs are determined by reviewing our demand forecast and by determining what