Logitech 2010 Annual Report Download - page 132

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Customer Incentive Programs. Customer incentive programs include volume and consumer rebates. We offer
volume rebates to our distribution and retail customers related to purchase volumes or sales of specific products by
distributors to specified retailers. Reserves for volume rebates are recognized as a reduction of the sale price at the
time of sale. Estimates of required reserves are determined based on negotiated terms, consideration of historical
experience, anticipated volume of future purchases, and inventory levels in the channel. Consumer rebates are
offered from time to time at the Company’s discretion directly to end-users. Estimated costs of consumer rebates
and similar incentives are recorded at the time the incentive is offered, based on the specific terms and conditions.
Certain incentive programs, including consumer rebates, require management to estimate the number of customers
who will actually redeem the incentive based on historical experience and the specific terms and conditions of
particular programs.
Price Protection and Special Pricing. We have contractual agreements with certain of our customers that
contain terms allowing price protection credits to be issued in the event of a subsequent price reduction (contractual
price protection). At management’s discretion, we also offer special pricing discounts to certain customers. Special
pricing discounts are usually offered only for limited time periods or for sales to specific indirect partners. Our
decision to make price reductions is influenced by channel inventory levels, product life cycle stage, market
acceptance of products, the competitive environment, new product introductions and other factors. Credits are
issued for units that customers have on hand or in transit at the date of the price reduction. Reserves for the estimated
amounts to be reimbursed to qualifying customers are established quarterly based on planned price reductions,
analyses of qualified inventories on hand with distributors and retailers and historical trends by customer and by
product.
We regularly evaluate the adequacy of our accruals for product returns, cooperative marketing arrangements,
customer incentive programs and pricing programs. Future market conditions and product transitions may require
the Company to take action to increase such programs. In addition, when the variables used to estimate these
costs change, or if actual costs differ significantly from the estimates, we would be required to record incremental
reductions to revenue or increase operating expenses. If, at any future time, the Company becomes unable to
reasonably estimate these costs, recognition of revenue might be deferred until products are sold to end-users,
which would adversely impact revenue in the period of transition.
Investment Securities
Our investment securities portfolio as of March 31, 2010 and 2009 consisted of auction rate securities collateralized
by residential and commercial mortgages. The estimated fair value of our investment securities was $1.0 million and
$1.6 million at March 31, 2010 and 2009. Estimated fair value was determined by estimating values of the underlying
collateral using analogous published indices or by estimating future cash flows, either through discounted cash flow
or option pricing methods, incorporating assumptions of default and other future conditions. The investments are
classified as available-for-sale, and were reclassified from current to non-current assets as of April 1, 2009, as sale or
realization of proceeds from sale is not expected within our normal operating cycle of one year.
Allowance for Doubtful Accounts
We sell our products through a worldwide network of distributors, retailers and OEM customers. Logitech
generally does not require any collateral from its customers. However, we seek to control our credit risk through
ongoing credit evaluations of our customers’ financial condition.
We regularly evaluate the collectibility of our accounts receivable and maintain allowances for doubtful
accounts. The allowances are based on management’s assessment of the collectibility of specific customer accounts,
including their credit worthiness and financial condition, as well as the Company’s historical experience with bad
debts and customer deductions, receivables aging, current economic trends and geographic or country-specific
risks and the financial condition of our distribution channel. If management determines that a customer’s accounts
receivable balance is uncollectible, recognition of revenue from that customer is deferred until collectibility is
reasonably assured.