Logitech 2003 Annual Report Download - page 64

F-7
LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — The Company:
Logitech International S.A. designs, manufactures and markets personal interface products and supporting
software that serve as the primary physical interface between people and their personal computers and other digital
platforms. The Company’s products include corded and cordless mice, trackballs, and keyboards; joysticks, gamepads
and racing systems; internet video cameras; PC speakers, headsets and microphones; and 3D controllers. The
Company sells its products to both original equipment manufacturers ("OEMs") and to a network of retail distributors
and resellers.
Logitech was founded in Switzerland in 1981, and in 1988 listed its registered shares in an initial public offering
in Switzerland. In 1997, the Company sold shares in a U.S. initial public offering in the form of American Depositary
Shares (“ADSs”) and listed the ADSs on the Nasdaq National Market system. The Company’s corporate headquarters
are in Fremont, California through its U.S. subsidiary, with regional headquarters in Romanel, Switzerland, Hsinchu,
Taiwan, and Hong Kong, China through local subsidiaries. The Company has its principal manufacturing operations
in China, and distribution facilities in the U.S., Europe and Asia.
Note 2 — Summary of Significant Accounting Policies:
Basis of Presentation
The consolidated financial statements include the accounts of Logitech and its subsidiaries. All material
intercompany balances and transactions have been eliminated. The consolidated financial statements are presented in
accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and
comply with Swiss law.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to use estimates
and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses. Actual results could
differ from those estimates.
Revenue Recognition
Revenues are recognized when all of the following criteria are met:
• evidence of an arrangement exists between the Company and the customer;
• title and risk of loss transfers to the customer;
• the price of the product is fixed or determinable; and
• collectibility of the receivable is reasonably assured.
Revenues from sales to distributors and authorized resellers are subject to terms allowing price protection,
certain rights of return and allowances for customer marketing programs. Accordingly, allowances for estimated
future returns, price protection and customer marketing programs are provided for upon revenue recognition. Such
amounts are estimated, and periodically adjusted, based on historical and anticipated rates of returns, distributor
inventory levels and other factors and recorded as a reduction of revenue.
Advertising
Advertising costs are expensed as incurred and amounted to $76.9 million in 2003, $71.6 million in 2002 and
$53.9 million in 2001. Advertising costs are recorded as either a sales and marketing expense or a deduction from
sales. Advertising costs reimbursed by the Company to a vendor must have an identifiable benefit and an estimable
fair value in order to be classified as an operating expense. If these criteria are not met, the cost is classified as a
deduction from revenue.