Tech Data 2014 Annual Report Download - page 45

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 5 - 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 (“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 2014, 2013
and 2012.
The Company generated approximately 21% , 21% and 25%
of consolidated net sales in fiscal 2014, 2013 and 2012, respectively, from products
purchased from Hewlett-Packard Company and 13% and 12% of consolidated net sales in fiscal 2014 and 2013, respectively, 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 2014, 2013 or 2012.
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 $1.0 million and $6.0 million at January 31, 2014 and 2013, respectively,
related to bank accounts where a right of offset 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
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