Logitech 2013 Annual Report Download - page 168

LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Allowances for Doubtful Accounts
Allowances for doubtful accounts are maintained for estimated losses resulting from the inability of the
Company’s customers to make required payments. The allowances are based on the Company’s regular assessment
of the credit worthiness and financial condition of specific customers, as well as its historical experience with bad
debts and customer deductions, receivables aging, current economic trends, geographic or country-specific risks
and the financial condition of its distribution channels.
Inventories
Inventories are stated at the lower of cost or market. Costs are computed under the standard cost method,
which approximates actual costs determined on the first-in, first-out basis. The Company records write-downs
of inventories which are obsolete or in excess of anticipated demand or market value based on a consideration of
marketability and product life cycle stage, product development plans, component cost trends, demand forecasts,
historical sales, and assumptions about future demand and market conditions.
Investments
The Company’s investment securities portfolio consists of bank time deposits, marketable securities related to
a deferred compensation plan, and auction rate securities collateralized by residential and commercial mortgages.
The bank time deposits are classified as cash equivalents, and are recorded at cost, which approximates
fair value.
The marketable securities related to the deferred compensation plan are classified as non-current trading
investments, as they are intended to fund the deferred compensation plan long-term liability. Trading activity
is directed by plan participants and is not intended to create short-term gains for the benefit of the Company.
These securities are recorded at fair value based on quoted market prices. Earnings, gains and losses on trading
investments are included in other income (expense), net.
The auction rate securities are classified as non-current available-for-sale assets, and are recorded at estimated
fair value. Declines in fair value of the auction rate securities are deemed other-than-temporary and are included in
other income (expense), net. Increases in fair value are deemed temporary and are included in accumulated other
comprehensive income (loss).
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 direct costs
incurred during the application development stage are capitalized.
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, internal-use software
development over useful lives of three to five years and leasehold improvements over the lesser of the useful life of
the improvement or the term of the lease.
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 (loss).
Note 2 — Summary of Significant Accounting Policies (Continued)
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