Ingram Micro 2011 Annual Report Download - page 39

ability to make payments, could result in charges for additional allowances exceeding our expectations.
Our estimates are influenced by the following considerations: the large number of customers and their
dispersion across wide geographic areas; a continuing credit evaluation of our customers’ financial
condition; aging of trade accounts receivable, individually and in the aggregate; credit insurance
coverage; the value and adequacy of collateral received from our customers in certain circumstances; our
historical loss experience; and changes in credit risk and capital availability of our customers resulting
from economic conditions. From time to time, we have had one customer account for 10% or more of our
consolidated trade accounts receivable, although no single customer has accounted for 10% or more of
our consolidated net sales.
•Vendor Programs — We receive funds from vendors for price protection, product return privileges,
product rebates, marketing/promotion, infrastructure reimbursement and meet-competition programs,
which are recorded as adjustments to product costs, revenue, or SG&A expenses according to the nature
of the program. Some of these programs may extend over more than one quarterly reporting period. We
accrue rebates or other vendor incentives as earned based on sales of qualifying products or as services
are provided in accordance with the terms of the related program. Actual rebates may vary based on
volume or other sales achievement levels, which could result in an increase or reduction in the estimated
amounts previously accrued. We also provide reserves for receivables on vendor programs for estimated
losses resulting from vendors’ inability to pay or rejections of claims by vendors.
•Inventory — Our inventory levels are based on our projections of future demand and market conditions.
Any sudden decline in demand and/or rapid product improvements and technological changes could cause
us to have excess and/or obsolete inventory. On an ongoing basis, we review for estimated excess or
obsolete inventory and write down our inventory to its estimated net realizable value based upon our
forecasts of future demand and market conditions. If actual market conditions are less favorable than our
forecasts, additional inventory write-downs may be required. Our estimates are influenced by a number of
considerations, including: protection from loss in value of inventory under our vendor agreements; our
rights to return inventory to vendors in accordance with contractual stipulations; aging of inventory;
changes in demand due to the economic environment; and rapid product improvements and technological
changes.
•Goodwill, Intangible Assets and Other Long-Lived Assets — We evaluate goodwill and other intangible
assets in accordance with the provisions issued by the Financial Accounting Standards Board, or the
FASB. At December 31, 2011 and January 1, 2011, we have no recorded goodwill. We assess potential
impairment of our other identifiable intangible assets and other long-lived assets when there is evidence
that recent events or changes in circumstances, such as significant changes in the manner of use of the
asset, negative industry or economic trends, and significant underperformance relative to historical or
projected future operating results, have made recovery of an asset’s carrying value unlikely. No
impairments of our identifiable intangible assets or other long-lived assets were indicated in 2011, 2010
or 2009.
•Income Taxes — As part of the process of preparing our consolidated financial statements, we estimate
our income taxes in each of the taxing jurisdictions in which we operate. This process involves estimating
our actual current tax expense together with assessing the future tax impact of any differences resulting
from the different treatment of certain items, such as the timing for recognizing revenues and expenses
for tax versus financial reporting purposes. These differences may result in deferred tax assets and
liabilities, which are included in our consolidated balance sheet. We are required to assess the likelihood
that our deferred tax assets, which include net operating loss carryforwards, tax credits and temporary
differences that are expected to be deductible in future years, will be recoverable from future taxable
income. In making that assessment, we consider the nature of the deferred tax assets and related statutory
limits on utilization, recent operating results, future market growth, forecasted earnings, future taxable
income, the mix of earnings in the jurisdictions in which we operate and prudent and feasible tax planning
strategies. If, based upon available evidence, recovery of the full amount of the deferred tax assets is not
likely, we provide a valuation allowance on any amount not likely to be realized. In that regard, we
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