iRobot 2010 Annual Report Download - page 98

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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of the Business
iRobot Corporation (“iRobot” or the “Company”) develops robotics and artificial intelligence technologies
and applies these technologies in producing and marketing robots. The majority of the Company’s revenue is
generated from product sales and government and industrial research and development contracts.
The Company is subject to risks common to companies in high-tech industries including, but not limited to,
uncertainty of progress in developing technologies, new technological innovations, dependence on key personnel,
protection of proprietary technology, compliance with government regulations, uncertainty of market acceptance of
products, the need to obtain financing, if necessary, global economic conditions and associated impact on consumer
spending, and changes in policies and spending priorities of the U.S. federal government and other government
agencies.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include those of iRobot and its subsidiaries, after
elimination of all intercompany accounts and transactions. iRobot has prepared the accompanying consolidated
financial statements in conformity with accounting principles generally accepted in the United States of America.
Use of Estimates
The preparation of these financial statements in conformity with accounting principles generally accepted in
the United States requires the Company to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. On an ongoing basis,
management evaluates these estimates and judgments, including those related to revenue recognition, sales returns,
bad debts, warranty claims, inventory reserves, valuation of investments, assumptions used in valuing stock-based
compensation instruments and income taxes. The Company bases these estimates on historical and anticipated
results, and trends and on various other assumptions that the Company believes are reasonable under the
circumstances, including assumptions as to future events. These estimates form the basis for making judgments
about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature,
estimates are subject to an inherent degree of uncertainty. Actual results may differ from the Company’s estimates.
Fiscal Year-End
The Company operates and reports using a 52-53 week fiscal year ending on the Saturday closest to
December 31. Accordingly, the Company’s fiscal quarters will end on the Saturday that falls closest to the last
day of the third month of each quarter.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original or remaining maturity of three months or
less at the time of purchase to be cash equivalents. The Company invests its excess cash primarily in money market
funds or savings accounts of major financial institutions. Accordingly, its cash equivalents are subject to minimal
credit and market risk. At January 1, 2011 and January 2, 2010, cash equivalents were comprised of money market
and savings account funds totaling $93.4 million and $63.1 million, respectively. These cash equivalents are carried
at cost, which approximates fair value.
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