3Ware 2003 Annual Report Download - page 24
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determinable; and 4) collectibility is reasonably assured. We recognize revenue upon determination that all
criteria for revenue recognition have been met. The criteria are usually met at the time of product shipment,
except for shipments to distributors with rights of return. Revenue from shipments to distributors with rights of
return are deferred until all return or cancellation privileges lapse. In addition, we record reductions to revenue
for estimated allowances such as returns and competitive pricing programs. If actual returns or pricing
adjustments exceed our estimates, additional reductions to revenue would result.
Allowance for Bad Debt
We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our
customers to make required payments. Our allowance for doubtful accounts is based on our assessment of the
collectibility of specific customer accounts, the aging of accounts receivable, our history of bad debts, and the
general condition of the industry. If a major customer’s credit worthiness deteriorates, or our customers’ actual
defaults exceed our historical experience, our estimates could change and impact our reported results.
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