Invacare 2013 Annual Report Download - page 60

I-54
DIVIDEND POLICY
It is the Company’s policy to pay a nominal dividend in order for its stock to be more attractive to a broader range of investors.
The current annual dividend rate remains at $0.05 per Common Share and $0.045 per Class B Common Share. It is not anticipated
that this will change materially as the Company believes that capital should be kept available for use in growth opportunities
through internal development and acquisitions. For 2013, annualized dividends of $0.05 per Common Share and $0.045 per Class B
Common Share were declared and paid.
CRITICAL ACCOUNTING ESTIMATES
The Consolidated Financial Statements included in the report include accounts of the Company and all majority-owned
subsidiaries. The preparation of financial statements in conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the
accompanying Consolidated Financial Statements and related footnotes. In preparing the financial statements, management has
made its best estimates and judgments of certain amounts included in the financial statements, giving due consideration to
materiality. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to
future uncertainties and, as a result, actual results could differ from these estimates.
The following critical accounting policies, among others, affect the more significant judgments and estimates used in
preparation of the Company’s consolidated financial statements.
Revenue Recognition
Invacare’s revenues are recognized when products are shipped or services provided to unaffiliated customers. Revenue
Recognition, ASC 605, provides guidance on the application of generally accepted accounting principles to selected revenue
recognition issues. The Company has concluded that its revenue recognition policy is appropriate and in accordance with GAAP
and ASC 605. Shipping and handling costs are included in cost of goods sold.
Sales are made only to customers with whom the Company believes collection is reasonably assured based upon a credit
analysis, which may include obtaining a credit application, a signed security agreement, personal guarantee and/or a cross corporate
guarantee depending on the credit history of the customer. Credit lines are established for new customers after an evaluation of
their credit report and/or other relevant financial information. Existing credit lines are regularly reviewed and adjusted with
consideration given to any outstanding past due amounts.
The Company offers discounts and rebates, which are accounted for as reductions to revenue in the period in which the sale
is recognized. Discounts offered include: cash discounts for prompt payment, base and trade discounts based on contract level for
specific classes of customers. Volume discounts and rebates are given based on large purchases and the achievement of certain
sales volumes. Product returns are accounted for as a reduction to reported sales with estimates recorded for anticipated returns
at the time of sale. The Company does not ship any goods on consignment.
Distributed products sold by the Company are accounted for in accordance with the revenue recognition guidance in ASC
605-45-05. The Company records distributed product sales gross as a principal since the Company takes title to the products and
has the risks of loss for collections, delivery and returns.
Product sales that give rise to installment receivables are recorded at the time of sale when the risks and rewards of ownership
are transferred. Interest income is recognized on installment agreements in accordance with the terms of the agreements. Installment
accounts are monitored and if a customer defaults on payments, interest income is no longer recognized. All installment accounts
are accounted for using the same methodology, regardless of duration of the installment agreements.
Allowance for Uncollectible Accounts Receivable
The estimated allowance for uncollectible amounts is based primarily on management's evaluation of the financial condition
of the customer. In addition, as a result of the third party financing arrangement, management monitors the collection status of
these contracts in accordance with the Company's limited recourse obligations and provides amounts necessary for estimated
losses in the allowance for doubtful accounts and establishing reserves for specific customers as needed.
The Company continues to closely monitor the credit-worthiness of its customers and adhere to tight credit policies. In 2013,
the Centers for Medicare and Medicaid Services announced new Medicare prices which became effective in July 2013 for the