Tech Data 2013 Annual Report Download - page 49

Table of Contents
on the underlying fair value of the invested assets contained within the life insurance policies. The gains and losses are recorded in the Company’s
Consolidated Statement of Income within "other expense (income), net."
Accounts Receivable
The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required
payments. In estimating the required allowance, the Company takes into consideration the overall quality and aging of the receivable portfolio, the
large number of customers and their dispersion across wide geographic areas, the existence of credit insurance, specifically identified customer
risks, historical write-off experience and the current economic environment. If actual customer performance were to deteriorate to an extent not
expected by the Company, additional allowances may be required which could have an adverse effect on the Company’s financial results.
Conversely, if actual customer performance were to improve to an extent not expected by us, a reduction in the allowance may be required which
could have a favorable effect on the Company’s consolidated financial results.
Accounts Receivable Purchase Agreements
The Company has certain uncommitted accounts receivable purchase agreements under which certain accounts receivable may be sold, without
recourse, to third-party financial institutions. Under these programs, the Company may sell certain accounts receivable in exchange for cash less a
discount, as defined in the agreements. Available capacity under these programs, which the Company uses as a source of working capital funding, is
dependent on the level of accounts receivable eligible to be sold into these programs and the financial institutions' willingness to purchase such
receivables. In addition, certain of these agreements also require that the Company continue to service, administer and collect the sold accounts
receivable. At January 31, 2013 and 2012, the Company had a total of $284.7 million and $176.6 million , respectively, of accounts receivable sold
to and held by financial institutions under these agreements. During the fiscal years ended January 31, 2013, 2012 and 2011, discount fees recorded
under these facilities were $2.6 million , $1.1 million , and $0.5 million , respectively, which are included as a component of "other expense
(income), net" in the Company's Consolidated Statement of Income.
Inventories
Inventories, consisting entirely of finished goods, are stated at the lower of cost or market, cost being determined on a moving average cost basis,
which approximates the first-in, first-out (“FIFO”) method. Inventory is written down for estimated obsolescence equal to the difference between
the cost of inventory and the estimated market value, based upon an aging analysis of the inventory on hand, specifically known inventory-related
risks (such as technological obsolescence and the nature of vendor terms surrounding price protection and product returns), foreign currency
fluctuations for foreign-sourced product and assumptions about future demand. Market conditions or changes in terms and conditions by the
Company’s vendors that are less favorable than those projected by management may require additional inventory write-
downs, which could have an
adverse effect on the Company’s consolidated financial results.
Vendor Incentives
The Company receives incentives from vendors related to cooperative advertising allowances, infrastructure funding, volume rebates and other
incentive agreements. These incentives are generally under quarterly, semi-annual or annual agreements with the vendors; however, some of these
incentives are negotiated on an ad-hoc basis to support specific programs mutually developed with the vendor. Unrestricted volume rebates and
early payment discounts received from vendors are recorded when they are earned as a reduction of inventory and as a reduction of cost of products
sold as the related inventory is sold. Vendor incentives for specifically identified cooperative advertising programs and infrastructure funding are
recorded when earned as adjustments to product costs or selling, general and administrative expenses, depending on the nature of the program.
Reserves for receivables on vendor programs are recorded for estimated losses resulting from vendors’ inability to pay or rejections of claims by
vendors. Should amounts recorded as outstanding receivables from vendors be deemed uncollectible, additional allowances may be required which
could have an adverse effect on the Company’s consolidated financial results. Conversely, if amounts recorded as outstanding receivables from
vendors were to improve to an extent not expected by us, a reduction in the allowance may be required which could have a favorable effect on the
Company’s consolidated financial results.
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