Logitech 2006 Annual Report Download - page 133

LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Impairment of Long-Lived Assets
The Company reviews long-lived assets, such as investments, property and equipment, and intangible assets,
for impairment whenever events indicate that the carrying amounts might not be recoverable. Recoverability of
investments, property and equipment, and other intangible assets is measured by comparing the projected
undiscounted net cash flows associated with those assets to their carrying values. If an asset is considered
impaired, it is written down to fair value, which is determined based on the asset’s projected discounted cash
flows or appraised value, depending on the nature of the asset. Goodwill is evaluated for impairment at least
annually.
Income Taxes
The Company provides for income taxes using the liability method, which requires that deferred tax assets
and liabilities be recognized for the expected future tax consequences of temporary differences resulting from
differing treatment of items for tax and accounting purposes. In estimating future tax consequences, expected
future events are taken into consideration, with the exception of potential tax law or tax rate changes.
Fair Value of Financial Instruments
The carrying value of certain of the Company’s financial instruments, including cash and cash equivalents
and accounts receivable, accounts payable, short-term debt and current maturities of long-term debt approximates
fair value due to their short maturities. The estimated fair value of publicly traded financial equity instruments
are determined by quoted market prices.
Net Income per Share and ADS
Basic net income per share and ADS is computed by dividing net income by the weighted average
outstanding registered shares. Diluted net income per share and ADS is computed using the weighted average
outstanding registered shares and dilutive registered share equivalents. The registered share equivalents are
registered shares issuable upon the exercise of stock options computed using the treasury stock method, and upon
the conversion of convertible debt computed using the if-converted method. For the fiscal years ended March 31,
2006, 2005 and 2004, the conversion of convertible debt was included in the registered share equivalents due to
its dilutive effect.
The computations of the basic and diluted net income per share amounts for the Company were as follows
(in thousands except per share amounts):
Year ended March 31,
2006 2005 2004
Net income – basic ............................................... $181,105 $149,266 $132,153
Convertible debt interest expense, net of income taxes ................... 1,520 2,877 2,550
Netincome–diluted ............................................. $182,625 $152,143 $134,703
Weighted average shares – basic .................................... 90,681 88,504 90,692
Effect of dilutive stock options ..................................... 5,690 5,172 4,180
Effect of dilutive convertible debt ................................... 3,014 5,449 5,448
Weighted average shares – diluted ................................... 99,385 99,125 100,320
Net income per share and ADS – basic ............................... $ 2.00 $ 1.69 $ 1.46
NetincomepershareandADS–diluted.............................. $ 1.84 $ 1.53 $ 1.34
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