CompUSA 2011 Annual Report Download - page 20

In the discussion of our results of operations we refer to business to business sales, consumer channel sales and period to period constant currency
comparisons. Business to business sales are sales made direct to other businesses through managed business relationships, outbound call centers and
extranets. Sales in the Industrial Products segment and Corporate and other are considered to be business to business sales. Consumer channel sales are
sales from retail stores, consumer websites, inbound call centers and television shopping channels. Constant currency refers to the adjustment of the
results of our foreign operations to exclude the effects of period to period fluctuations in currency exchange rates.
Critical Accounting Policies and Estimates
Our significant accounting policies are described in Note 1 to the Consolidated Financial Statements included in Item 15 of this Form 10-K. Certain
accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial
estimates. By their nature, these judgments are subject to an inherent degree of uncertainty, and as a result, actual results could differ materially from
those estimates. These judgments are based on historical experience , observation of trends in the industry, information provided by customers and
information available from other outside sources, as appropriate. Management believes that full consideration has been given to all relevant
circumstances that we may be subject to, and the consolidated financial statements of the Company accurately reflect management’s best estimate of
the consolidated results of operations, financial position and cash flows of the Company for the years presented. We identify below a number of
policies that entail significant judgments or estimates, the assumptions and or judgments used to determine those estimates and the potential effects on
reported financial results if actual results differ materially from these estimates.
Table of Contents
Accounting policy
Assumptions and uncertainties
Quantification and analysis of effect on actual
results if estimates differ materially
Revenue Recognition.
We recognize product
sales when persuasive evidence of an order
arrangement exists, delivery has occurred, the
sales price is fixed or determinable and
collectibility is reasonably assured. Generally,
these criteria are met at the time of receipt by
customers when title and risk of loss both are
transferred. Sales are presented net of returns
and allowances, rebates and sales
incentives. Reserves for estimated returns and
allowances are provided when sales are
recorded, based on historical experience and
current trends.
Our revenue recognition policy contains
assumptions and judgments made by
management related to the timing and amounts
of future sales returns. Sales returns are
estimated based upon historical experience and
current known trends.
We have not made any material changes to our
sales return reserve policy in the past three
years and we do not anticipate making any
material changes to this policy in the future.
However if our estimates are materially
different than our actual experience we could
have a material gain or loss adjustment.
Allowance for Doubtful Accounts Receivable
.
We record an allowance for doubtful accounts
to reflect our estimate of the collectibility of our
trade accounts receivable. While bad debt
allowances have been within expectations and
the provisions established, there can be no
guarantee that we will continue to experience
the same allowance rate we have in the past.
Our allowance for doubtful accounts policy
contains assumptions and judgments made by
management related to collectibility of aged
accounts receivable and chargebacks from
credit card sales. We evaluate the collectibility
of accounts receivable based on a combination
of factors, including an analysis of the age of
customer accounts and our historical experience
with accounts receivable write-offs. The
analysis also includes the financial condition of
a specific customer or industry, and general
economic conditions. In circumstances where
we are aware of customer credit card charge-
backs or a specific customer’s inability to meet
its financial obligations, a specific reserve for
bad debts applicable to amounts due to reduce
the net recognized receivable to the amount
management reasonably believes will be
collected is recorded. In those situations with
ongoing discussions, the amount of bad debt
recognized is based on the status of the
discussions.
We have not made any material changes to our
allowance for doubtful accounts receivable
reserve policy in the past three years and we do
not anticipate making any material changes to
this policy in the future. However if our
estimates are materially different than our actual
experience we could have a material gain or
loss adjustment.
A change of 10% in our allowance for doubtful
accounts reserve at December 31, 2011 would
impact net income by approximately $0.4
million.
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