iRobot 2011 Annual Report Download - page 78

Form 10-K
For the fiscal years ended December 31, 2011 and January 1, 2011, these expenses amounted to $26.5 million
and $27.1 million, respectively. In accordance with generally accepted accounting principles, these expenses
have been classified as cost of revenue rather than research and development expense. For the years ended
December 31, 2011 and January 1, 2011, the combined investment in future technologies, classified as cost of
revenue and research and development expense, was $63.0 million and $51.9 million, respectively.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses consist primarily of:
• salaries and related costs for sales and marketing personnel;
• salaries and related costs for executives and administrative personnel;
• advertising, marketing and other brand-building costs;
• fulfillment costs associated with direct-to-consumer sales through our on-line store;
• customer service costs;
• professional services costs;
• information systems and infrastructure costs;
• travel and related costs; and
• occupancy and other overhead costs.
We anticipate that selling, general and administrative expenses will increase in absolute dollars but remain
relatively flat as a percentage of revenue in the foreseeable future as we continue to build the iRobot brand and
also maintain company profitability.
For the fiscal years ended December 31, 2011 and January 1, 2011, selling, general and administrative
expense was $102.3 million and $87.2 million, or 22.0% and 21.7% of total revenue, respectively.
Fiscal Periods
We operate and report using a 52-53 week fiscal year ending on the Saturday closest to December 31.
Accordingly, our fiscal quarters will end on the Saturday that falls closest to the last day of the third month of
each quarter.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these consolidated financial statements requires us
to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and
expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our actual
results may differ from these estimates.
We believe that of our significant accounting policies, which are described in the notes to our consolidated
financial statements, the following accounting policies involve a greater degree of judgment and complexity.
Accordingly, we believe that the following accounting policies are the most critical to aid in fully understanding
and evaluating our consolidated financial condition and results of operations.
Revenue Recognition
We recognize revenue from sales of consumer products under the terms of the customer agreement upon
transfer of title and risk of loss to the customer, which is typically upon the delivery of the product, provided the
price is fixed or determinable, collection is determined to be reasonably assured and no significant obligations
remain. Sales to domestic resellers are typically subject to agreements allowing for limited rights of return for
defective products only, rebates and price protection. Accordingly, we reduce revenue for our estimates of
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