Garmin 2008 Annual Report Download - page 86

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benefits were classified as current liabilities, but the entire $214.4 million is required to be classified as non-current
at December 27, 2008.
Interest expense and penalties, if any, accrued on the unrecognized tax benefits are reflected in income tax
expense. At December 27, 2008 and December 29, 2007, the Company had accrued approximately $11.1 million
and $4.7 million respectively for interest. Interest expense included in income tax expense for the years ending
December 27, 2008 and December 29, 2007 are $6.4 million and $1.4 million, respectively. The Company had no
amounts accrued for penalties as the nature of the unrecognized tax benefits, if recognized, would not warrant the
imposition of penalties.
The Company files income tax returns in the U.S. federal jurisdiction, and various state, local and foreign
jurisdictions. The Company is no longer subject to U.S. federal, state, or local tax examinations by tax authorities
for years prior to 2005. The Company also considers 2003 and 2004 US federal returns to have been effectively
settled due to the completion of audit examination by the Internal Revenue Service. The Company is no longer
subject to Taiwan income tax examinations by tax authorities for years prior to 2003. The Company is no longer
subject to United Kingdom tax examinations by tax authorities for years prior to 2007.
The Company believes that it is reasonably possible that approximately $20 million of its reserves for
certain unrecognized tax benefits will decrease within the next 12 months as the result of the expiration of statute of
limitations. This potential decrease in unrecognized tax benefits would impact the Company’s effective tax rate
within the next 12 months.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that affect the amounts
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 typically have been within
management’s expectations. Credit risk has become more significant in fiscal 2008 due to the macro economic
conditions but the Company is managing credit terms and balances accordingly. 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.
Revenue Recognition
The Company recognizes revenue when persuasive evidence of a sales arrangement exists, delivery has
occurred, the sales price is fixed or determinable, and collection is reasonably assured. Product is considered
delivered to the customer once it has been shipped and title and risk of loss have been transferred. For most of the
Company’s product sales, these criteria are met at the time the product is delivered to the customer’s location. 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.