CDW 2006 Annual Report Download - page 44

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CDW CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
CDW Corporation (collectively with its subsidiaries, “CDW” or the “Company”) is a leading
provider of multi-branded information technology products and services in the United States and
Canada. We focus on meeting the technology needs of our customers in business, government,
and education through our extensive offering of products from leading brands and a variety of
value-added services.
Presented here is a summary of the most significant accounting policies used in the preparation
of our consolidated financial statements. Our most significant accounting policies relate to the
sale, purchase, distribution and promotion of our products. Therefore, our accounting policies in
the areas of revenue recognition, inventory valuation, vendor purchase and merchandising
arrangements and marketing activities, among others, are discussed.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of CDW Corporation and
our wholly-owned subsidiaries. All intercompany transactions and accounts are eliminated in
consolidation. As described in Note 14, one of our wholly-owned subsidiaries, CDW Capital
Corporation (“CDWCC”), owned a 50 percent interest in CDW Leasing, LLC (“CDW-L”) until
CDWCC sold its interest in CDW-L effective August 1, 2004. In accordance with Financial
Accounting Standards Board (“FASB”) Interpretation No. 46 (revised December 2003),
“Consolidation of Variable Interest Entities, an interpretation of ARB 51,” we consolidated CDW-L,
beginning on December 31, 2003, until our interest was sold.
Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted
in the United States of America requires management to make use of certain estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenue
and expenses during the reported periods. We base our estimates on historical experience and on
various other assumptions that we believe are reasonable under the circumstances, the results of
which form the basis for making judgments about carrying values of assets and liabilities that are
not readily apparent from other sources. Significant estimates in these financial statements include
allowances for doubtful accounts receivable, sales returns and pricing disputes, net realizable value
of inventories, vendor transactions, loss contingencies and intangible assets. Actual results could
differ from those estimates.
Allowance for doubtful accounts receivable. We provide allowances for doubtful accounts related
to accounts receivable for estimated losses resulting from the inability of our customers to make
required payments. We take into consideration the overall quality and aging of the receivable
portfolio along with specifically identified customer risks. If actual customer payment
performance were to deteriorate to an extent not expected, additional allowances may be
required.
Sales returns and pricing disputes. At the time of sale, we record an estimate for sales returns
and pricing disputes based on historical experience. If actual sales returns and pricing disputes
are greater than estimated by management, additional expense may be incurred.