Garmin 2005 Annual Report Download - page 88

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58
reported in the consolidated financial statements and accompanying notes. Actual results could differ from those
estimates.
Concentration of Credit Risk
The Company grants credit to certain customers who meet the Company’s pre-established credit
requirements. Generally, the Company does not require security when trade credit is granted to customers. Credit
losses are provided for in the Company’s consolidated financial statements and consistently have been within
management’s expectations. Certain customers are allowed extended terms consistent with normal industry
practice. Most of these extended terms can be classified as either relating to seasonal sales variations or to the
timing of new product releases by the Company and the impact those releases may have on the cash flow
requirements of our customers.
Revenue Recognition
The Company recognizes revenue from product sales when the product is shipped to the customer and title
has transferred. The Company assumes no remaining significant obligations associated with the product sale other
than that related to its warranty programs discussed below.
Shipping and Handling Costs
Shipping and handling costs are included in cost of goods sold in the accompanying consolidated financial
statements.
Product Warranty
The Company provides for estimated warranty costs at the time of sale. The warranty period is generally
for one year from date of shipment with the exception of certain aviation products for which the warranty period is
two years from the date of installation.
Sales Programs
The Company provides certain monthly and quarterly incentives for its dealers based on various factors
including dealer purchasing volume and growth. Additionally, from time to time, the Company provides rebates to
end users on certain products. Estimated rebates and incentives payable to distributors are regularly reviewed and
recorded as accrued expenses on a monthly basis. In addition, the Company provides retailers with product
discounts termed “price protection” to assist these retailers in clearing older products from their inventories in
advance of new product releases. These rebates, incentives, and price protections are recorded as reductions to net
sales in the accompanying consolidated statements of income.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising expense charged to operations amounted
to approximately $59,309, $29,577, and $22,071 for the years ended December, 31, 2005, December 25, 2004, and
December 27, 2003, respectively.
Research and Development