iRobot 2011 Annual Report Download - page 92

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Form 10-K
Our minimum contractual payments consist of payments to our provider of direct fulfillment services for
direct to consumer sales of our home robots and a key component supplier for our home robots, which payments
are incurred in the ordinary course of business. Based on an analysis of actual fees for 2011 there was a shortfall
between our actual transaction fees and our contractual minimum fees for services. Expense accruals for the
amount of this shortfall have been recorded to selling and marketing expenses in fiscal 2011. Other obligations
consist of software license and services agreement for our home robots division customer service web support.
Off-Balance Sheet Arrangements
As of December 31, 2011, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of
Regulation S-K.
Recently Issued Accounting Pronouncements
In May 2011, the Financial Accounting Standards Board (“FASB”) issued amended guidance on fair value
measurement and related disclosures. The new guidance clarifies the concepts applicable for fair value
measurement of non-financial assets and requires the disclosure of quantitative information about the
unobservable inputs used in a fair value measurement. This guidance will be effective for reporting periods
beginning after December 15, 2011, and will be applied prospectively. We do not anticipate a material impact on
our consolidated financial statements as a result of the adoption of this amended guidance.
In June 2011, the FASB amended its accounting guidance on the presentation of other comprehensive
income (OCI) in an entity’s financial statements. The amended guidance eliminates the option to present the
components of OCI as part of the statement of changes in shareholders’ equity and provides two options for
presenting OCI: in a statement included in the income statement or in a separate statement immediately following
the income statement. The amendments do not change the guidance for the items that have to be reported in OCI
or when an item of OCI has to be moved into net income. For public entities, the amendments are effective for
fiscal years, and interim periods within those years, beginning after December 15, 2011. We do not anticipate
that our adoption of this guidance will have a material impact on our consolidated results.
In September 2011, the FASB issued updated guidance on the periodic testing of goodwill for impairment.
The updated guidance gives companies the option to perform a qualitative assessment to determine whether it is
more likely than not that the fair value of a reporting unit is less than its carrying amount. The amendment is
intended to reduce the cost and complexity of the annual goodwill impairment test by providing entities an option
to perform a qualitative assessment to determine whether further impairment testing is necessary. The updated
accounting guidance is effective for fiscal years beginning after December 15, 2011, with early adoption
permitted. We elected to adopt the updated guidance in 2011. The adoption of this guidance did not impact our
consolidated financial statements.
From time to time, new accounting pronouncements are issued by FASB that are adopted by us as of the
specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards,
which are not yet effective, will not have a material impact on our consolidated financial statements upon
adoption.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Exchange Risk
We maintain sales and business operations in foreign countries. As such, we have exposure to adverse
changes in exchange rates associated with operating expenses of our foreign operations, but we believe this
exposure to be immaterial. Additionally, we accept orders for home robots products in currencies other than the
U.S. dollar. We regularly monitor the level of non-U.S. dollar accounts receivable balances to determine if any
actions, including possibly entering into foreign currency forward contracts, should be taken to minimize the
impact of fluctuating exchange rates on our results of operations. Our international revenue is primarily
denominated in U.S. dollars and therefore any fluctuations in the Euro or any other non-U.S. dollar currencies
will have minimal direct impact on our international revenue. However, as the U.S. dollar strengthens or weakens
against other currencies, our international distributors may be impacted, which could affect their profitability and
our ability to maintain current pricing levels on our international consumer products.
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