Tech Data 2013 Annual Report Download - page 48

Table of Contents
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Tech Data Corporation (“Tech Data” or the “Company”) is one of the world’s largest wholesale distributors of technology products. The Company
serves as an indispensable link in the technology supply chain by bringing products from the world’s leading technology vendors to market, as well
as providing customers with advanced logistics capabilities and value-added services. Tech Data’s customers include value-added resellers, direct
marketers, retailers and corporate resellers who support the diverse technology needs of end users. The Company is managed in two geographic
segments: the Americas (including North America and South America) and Europe.
Principles of Consolidation
The consolidated financial statements include the accounts of Tech Data and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation. Noncontrolling interest is recognized for the portion of a consolidated joint venture not owned by the
Company. The noncontrolling interest of the consolidated joint venture was purchased by the Company during fiscal 2013 (as further discussed in
Note 6
- Acquisitions). The Company operates on a fiscal year that ends on January 31.
Basis of Presentation
The consolidated financial statements have been prepared by the Company, pursuant to the rules and regulations of the United States Securities and
Exchange Commission (“SEC”). The Company prepares its financial statements in conformity with generally accepted accounting principles in the
United States (“U.S. GAAP”). These principles require management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenue is recognized once four criteria are met: (1) the Company must have persuasive evidence that an arrangement exists; (2) delivery must
occur, which generally happens at the point of shipment (this includes the transfer of both title and risk of loss, provided that no significant
obligations remain); (3) the price must be fixed or determinable; and (4) collectability must be reasonably assured. Shipping revenue is included in
net sales while the related costs, including shipping and handling costs, are included in the cost of products sold. The Company allows its customers
to return product for exchange or credit subject to certain limitations. A provision for such returns is recorded at the time of sale based upon
historical experience. The Company also has certain fulfillment and extended warranty contracts with certain customers and suppliers whereby the
Company assumes an agency relationship in the transaction. In such arrangements where the Company is not the primary obligor, revenues are
recognized as the net fee associated with serving as an agent. Taxes imposed by governmental authorities on the Company’s revenue-producing
activities with customers, such as sales taxes and value added taxes, are excluded from net sales.
Service revenue associated with configuration, training, fulfillment and other services is recognized when the work is complete and the four criteria
discussed above have been met. Service revenues have represented less than 10% of consolidated net sales for fiscal years 2013, 2012 and 2011.
The Company generated approximately 21% , 25% and 27% of consolidated net sales in fiscal 2013, 2012 and 2011, respectively, from products
purchased from Hewlett-Packard Company and 12% of consolidated net sales in fiscal 2013 from products purchased from Apple, Inc. There were
no other vendors and no customers that accounted for 10% or more of the Company’s consolidated net sales in fiscal 2013, 2012 or 2011.
Cash and Cash Equivalents
Short-term investments which are highly liquid and have an original maturity of 90 days or less are considered cash equivalents.
The Company had book overdrafts included in current liabilities of $6.0 million and $30.0 million at January 31, 2013 and 2012, respectively,
related to bank accounts where a right of setoff does not exist.
Investments
The Company invests in life insurance policies to fund the Company’s nonqualified deferred compensation plan. The life insurance asset recorded
by the Company is the amount that would be realized upon the assumed surrender of the policy. This amount is based
44