Garmin 2008 Annual Report Download - page 87

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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 and certain marine products for which the warranty period is three years from
the date of shipment.
Sales Programs
The Company provides certain monthly and quarterly incentives for its dealers and distributors 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 dealers and
distributors are regularly reviewed and recorded as accrued expenses on a monthly basis. In addition, the Company
provides dealers and distributors with product discounts termed “price protection” to assist these customers in
clearing older products from their inventories in advance of new product releases. Each price protection discount is
tied to a specific product and can be applied to all customers who have purchased the price protected product or a
special price protection discount may be agreed to on an individual customer basis. These rebates, incentives, and
price protections are recorded as reductions to net sales in the accompanying consolidated statements of income in
the period the Company has sold the product.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising expense amounted to approximately
$208,177, $206,948, and $114,749 for the years ended December 27, 2008, December 29, 2007, and December 30,
2006, respectively.
Research and Development
A majority of the Company’s research and development is performed in the United States. Research and
development costs, which are expensed as incurred, amounted to approximately $206,109, $159,406, and $113,314
for the years ended December 27, 2008, December 29, 2007, and December 30, 2006, respectively.
Customer Service and Technical Support
Customer service and technical support costs are included on the selling, general and administrative
expense line on our statements of operations. Customer service and technical support costs include costs associated
with performing order processing, answering customer inquiries by telephone and through Web sites, e-mail and
other electronic means, and providing free technical support assistance to customers. In connection with the sale of
certain products, we provide a limited amount of free technical support assistance to customers. The technical
support is provided within one year after the associated revenue is recognized. We accrue the estimated cost of
providing this free support upon product shipment.
Software Development Costs
Statement of Financial Accounting Standards (SFAS) 86, “Accounting for Costs of Computer Software to
be Sold, Leased, or otherwise Marketed,” requires companies to expense software development costs as they incur
them until technological feasibility has been established, at which time those costs are capitalized until the product is
available for general release to customers. Our capitalized software development costs are not significant. SFAS 2,
“Accounting for Research and Development Costs,” establishes accounting and reporting standards for research and
development. In accordance with SFAS 2, costs we incur to enhance our existing products or after the general
release of the service using the product are expensed in the period they are incurred and included in research and
development costs on our statement of operations.