iRobot 2011 Annual Report Download - page 102

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Form 10-K
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
anticipated actual billing rates will be lower than the provisional rates currently in effect, the Company records a
cumulative revenue adjustment in the period in which the rate differential is identified. Revenue on firm fixed
price (“FFP”) contracts is recognized using the percentage-of-completion method. For government product FFP
contracts, revenue is recognized as the product is shipped or in accordance with the contract terms. Costs and
estimated gross margins on contracts are recorded as revenue as work is performed based on the percentage that
incurred costs compare to estimated total costs utilizing the most recent estimates of costs and funding. Changes
in job performance, job conditions, and estimated profitability, including those arising from final contract
settlements and government audits, may result in revisions to costs and income and are recognized in the period
in which the revisions are determined. Since many contracts extend over a long period of time, revisions in cost
and funding estimates during the progress of work have the effect of adjusting earnings applicable to past
performance in the current period. When the current contract estimate indicates a loss, a provision is made for the
total anticipated loss in the current period. Revenue earned in excess of billings, if any, is recorded as unbilled
revenue. Billings in excess of revenue earned, if any, are recorded as deferred revenue.
Allowance for Doubtful Accounts
The Company maintains an allowance for doubtful accounts to provide for the estimated amount of accounts
receivable that may not be collected. The allowance is based upon an assessment of customer creditworthiness,
historical payment experience and the age of outstanding receivables.
Activity related to the allowance for doubtful accounts was as follows:
Fiscal Year Ended
December 31,
2011
January 1,
2011
January 2,
2010
(In thousands)
Balance at beginning of period ......................... $88 $90 $65
Provision .......................................... — — 32
Deduction(*) ....................................... (1) (2) (7)
Balance at end of period .............................. $87 $88 $90
(*) Deductions related to allowance for doubtful accounts represent amounts written off against the allowance,
less recoveries.
Inventory
Inventory is stated at the lower of cost or net realizable value with cost being determined using the first-in,
first-out (FIFO) method. The Company maintains a reserve for inventory items to provide for an estimated
amount of excess or obsolete inventory.
Activity related to the inventory reserve was as follows:
Fiscal Year Ended
December 31,
2011
January 1,
2011
January 2,
2010
(In thousands)
Balance at beginning of period ......................... $2,836 $ 3,713 $ 2,770
Provision .......................................... 411 677 2,117
Deduction(*) ....................................... (679) (1,554) (1,174)
Balance at end of period .............................. $2,568 $ 2,836 $ 3,713
(*) Deductions related to inventory reserve accounts represent amounts written off against the reserve.
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