Polaris 2015 Annual Report Download - page 79

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Goodwill and other intangible assets. ASC Topic 350 prohibits the amortization of goodwill and intangible assets
with indefinite useful lives. Topic 350 requires that these assets be reviewed for impairment at least annually.
An impairment charge for goodwill is recognized only when the estimated fair value of a reporting unit,
including goodwill, is less than its carrying amount. Refer to Note 5 for additional information regarding
goodwill and other intangible assets.
Revenue recognition. Revenues are recognized at the time of shipment to the dealer or distributor or other
customers. Product returns, whether in the normal course of business or resulting from repossession under the
Company’s customer financing program (see Note 8), have not been material. Polaris sponsors certain sales
incentive programs and accrues liabilities for estimated sales promotion expenses and estimated holdback
amounts that are recognized as reductions to sales when products are sold to the dealer or distributor
customer.
Sales promotions and incentives. Polaris provides for estimated sales promotion and incentive expenses, which
are recognized as a reduction to sales, at the time of sale to the dealer or distributor. Examples of sales
promotion and incentive programs include dealer and consumer rebates, volume incentives, retail financing
programs and sales associate incentives. Sales promotion and incentive expenses are estimated based on
current programs and historical rates for each product line. Actual results may differ from these estimates if
market conditions dictate the need to enhance or reduce sales promotion and incentive programs or if the
customer usage rate varies from historical trends. Historically, sales promotion and incentive expenses have
been within the Company’s expectations and differences have not been material.
Dealer holdback programs. Dealer holdback represents a portion of the invoiced sales price that is expected to
be subsequently returned to the dealer or distributor as a sales incentive upon the ultimate retail sale of the
product. Holdback amounts reduce the ultimate net price of the products purchased by Polaris’ dealers or
distributors and, therefore, reduce the amount of sales Polaris recognizes at the time of shipment. The portion
of the invoiced sales price estimated as the holdback is recognized as ‘‘dealer holdback’’ liability on the
Company’s balance sheet until paid or forfeited. The minimal holdback adjustments in the estimated holdback
liability due to forfeitures are recognized in net sales. Payments are made to dealers or distributors at various
times during the year subject to previously established criteria.
Shipping and handling costs. Polaris records shipping and handling costs as a component of cost of sales at the
time the product is shipped.
Research and development expenses. Polaris records research and development expenses in the period in which
they are incurred as a component of operating expenses.
Advertising expenses. Polaris records advertising expenses as a component of selling and marketing expenses in
the period in which they are incurred. In the years ended December 31, 2015, 2014 and 2013, Polaris incurred
$80,090,000, $82,600,000 and $73,945,000, respectively.
Product warranties. Polaris provides a limited warranty for its ORVs for a period of six months, for a period of
one year for its snowmobiles, for a period of one or two years for its motorcycles depending on brand and
model year, and for a two year period for GEM, Goupil and Aixam vehicles. Polaris provides longer
warranties in certain geographical markets as determined by local regulations and market conditions and may
also provide longer warranties related to certain promotional programs. Polaris’ standard warranties require
the Company or its dealers to repair or replace defective products during such warranty periods at no cost to
the consumer. The warranty reserve is established at the time of sale to the dealer or distributor based on
management’s best estimate using historical rates and trends. Adjustments to the warranty reserve are made
from time to time as actual claims become known in order to properly estimate the amounts necessary to
settle future and existing claims on products sold as of the balance sheet date. Factors that could have an
impact on the warranty accrual in any given period include the following: improved manufacturing quality,
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