Logitech 2010 Annual Report Download - page 188

176
Investments
The Company’s investment securities portfolio consists of auction rate securities collateralized by residential
and commercial mortgages. The investment securities are classified as available-for-sale and are reported at estimated
fair value, which is 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.
Auction rate securities generally have maturity dates greater than 10 years, with interest rates that typically
reset through an auction every 28 days. The markets for the auction rate securities which the Company holds as of
March 31, 2010 and 2009 have failed since August 2007 and are not expected to resume in the foreseeable future,
if at all. As a result, the investments 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.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Additions and improvements are capitalized, and maintenance
and repairs are expensed as incurred. The Company capitalizes the cost of software developed for internal use in
connection with major projects. Costs incurred during the feasibility stage are expensed, whereas costs incurred
during the application development stage are capitalized.
With the exception of tooling, depreciation is provided using the straight-line method. Plant and buildings are
depreciated over estimated useful lives from ten to twenty-five years, equipment over useful lives from three to five
years, software development over useful lives of three to five years and leasehold improvements over the life of the
lease, generally not exceeding five years. Tooling is depreciated over the forecasted life of the tool, not to exceed
one year from the time it is placed into production. Depreciation for tooling is calculated based on the forecasted
production volume and adjusted quarterly based on actual production. When property and equipment is retired or
otherwise disposed of, the cost and accumulated depreciation are relieved from the accounts and the net gain or loss
is included in the determination of net income.
Goodwill and Other Intangible Assets
The Company’s intangible assets principally include goodwill, acquired technology, trademarks, customer
contracts and customer relationships, and other. Intangible assets with finite lives, which include acquired technology,
trademarks, customer contracts and customer relationships, and other, are recorded at cost and amortized using
the straight-line method over their useful lives ranging from one year to ten years. Intangible assets with indefinite
lives, which include goodwill, are recorded at cost and evaluated at least annually for impairment.
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.