LeapFrog 2013 Annual Report Download - page 54
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Please find page 54 of the 2013 LeapFrog annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
1. Business
LeapFrog Enterprises, Inc. and its consolidated subsidiaries (collectively, the ‘‘Company’’ or ‘‘LeapFrog’’
unless the context indicates otherwise) is a leading developer of educational entertainment for children. The
Company’s product portfolio consists of multimedia learning platforms and related content and learning toys.
LeapFrog has developed a number of learning platforms, including the LeapPad family of learning tablets, the
Leapster family of handheld learning game systems, and the LeapReader reading systems, which facilitate a
wide variety of learning experiences provided by our rich content libraries, available in cartridge, print and
digital format. LeapFrog has created hundreds of interactive content titles for its platforms, covering subjects
such as phonics, reading, writing, mathematics, science, social studies, creativity and life skills. In addition,
the Company has a broad line of stand-alone learning toys. Many of the Company’s products connect to its
proprietary online LeapFrog Learning Path, which provides personalized feedback on a child’s learning
progress and offers product recommendations to enhance each child’s learning experience. The Company’s
products are available in four languages and are sold globally through retailers, distributors and directly to
consumers via the leapfrog.com online store and the LeapFrog App Center (‘‘App Center’’).
2. Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The consolidated financial statements included herein have been prepared in accordance with accounting
principles generally accepted in the United States of America (‘‘GAAP’’).
The Company’s consolidated financial statements include the accounts of LeapFrog and its wholly-owned
subsidiaries organized in the United Kingdom, Canada, France, Mexico, Hong Kong and China. Intercompany
accounts and transactions have been eliminated in consolidation.
Foreign Currencies
LeapFrog measures and records the assets, liabilities and operations of its foreign operations using the
functional currency of the country in which the operations are located and utilizes the United States dollar
(‘‘USD’’) as its reporting currency. Assets and liabilities recorded in foreign currencies are translated at the
exchange rate as of the balance sheet date. Revenues and expenses are translated at average exchange rates
prevailing during the period. Translation adjustments resulting from this process are charged or credited to
accumulated other comprehensive income (loss), an equity account. Foreign currency transaction gains and
losses are included in income as incurred.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and
judgments that affect the amounts reported in the financial statements and accompanying notes. The
accounting estimates that require management’s most significant, difficult, and subjective judgments include
the evaluation of the Company’s accounts receivable-related allowances for doubtful accounts receivable, sales
returns, defective products, promotional markdowns, chargebacks and price changes, and cooperative
promotional arrangements, the valuation and nature of impairments of financial instruments, valuation and
amortization of capitalized product costs, inventory valuation, the recognition, measurement and valuation of
current and deferred income tax assets and liabilities, valuation of goodwill and stock-based compensation
assumptions. These estimates involve the consideration of complex factors and require management to make
judgments. The analysis of historical and future trends is subject to change from period to period. The actual
results experienced may differ from management’s estimates.
Reclassifications
Certain amounts in prior year financial statements included herein have been reclassified to conform to the
current year presentation.
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