Tech Data 2014 Annual Report Download - page 46

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 (income) expense, 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 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, 2014 and 2013, the Company had a total of $263.7 million and $284.7 million , respectively, of
accounts receivable sold to and held by financial institutions under these agreements. During the fiscal years ended January 31, 2014, 2013 and
2012, discount fees recorded under these facilities were $3.4 million , $2.6 million , and $1.1 million , respectively, which are included as a
component of "other (income) expense, 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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