iRobot 2010 Annual Report Download - page 79

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deferred tax assets was released. At January 1, 2011, we have total deferred tax assets of $21.2 million with no
valuation allowance.
During the quarter ending January 2, 2010, we recorded an out-of-period adjustment in the income tax
provision of $0.2 million to correct an error with respect to the earnings of our India subsidiary. We believe that this
adjustment did not have a material impact to our full year 2009 results. In addition, we do not believe the adjustment
is material to the amounts reported in previous periods.
Warranty
We typically provide a one-year warranty (with the exception of European consumer products which typically
have a two-year warranty period and our government and industrial spares and Negotiator products which typically
have a warranty period of less than one year) against defects in materials and workmanship and will either repair the
goods, provide replacement products at no charge to the customer or refund amounts to the customer for defective
products. We record estimated warranty costs, based on historical experience by product, at the time we recognize
product revenue. As the complexity of our products increases, we could experience higher warranty claims relative
to sales than we have previously experienced, and we may need to increase these estimated warranty reserves.
Inventory Valuation
We value our inventory at the lower of the actual cost of our inventory or its current estimated market value. We
write down inventory for obsolescence or unmarketable inventories based upon assumptions about future demand
and market conditions. Actual demand and market conditions may be lower than those that we project and this
difference could have a material adverse effect on our gross margin if inventory write-downs beyond those initially
recorded become necessary. Alternatively, if actual demand and market conditions are more favorable than those we
estimated at the time of such a write-down, our gross margin could be favorably impacted in future periods.
33
Form 10-K