Logitech 2014 Annual Report Download - page 161

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations
contains forward-looking statements that involve risks and uncertainties. The Company’s actual results could differ
materially from those anticipated in these statements as a result of certain factors, including those set forth in our
Annual Report on Form 10-K for the fiscal year ended March 31, 2014, available at www.sec.gov, under the caption
“Risk Factors” and elsewhere, and below in “Quantitative and Qualitative Disclosures about Market Risk”.
Restatement and Revision of Previously Issued Consolidated Financial Statements
As we announced on May 21, 2014, the Audit Committee, with the assistance of independent advisors, began
an independent investigation of certain accounting matters related to our previously issued financial statements.
On September 3, 2014, we announced that, in connection with this investigation, the Audit Committee, on
the recommendation of management, concluded that previously issued financial statements for fiscal years 2011
and 2012 and the first quarter of fiscal year 2012 could no longer be relied on due to an accounting misstatement
for inventory valuation reserves for Logitech’s now-discontinued Revue product. As a result, we recorded an
adjustment to increase cost of goods sold, and to increase inventory valuation reserves and the accrual for supplier
liability for components related to our now discontinued Revue product by $30.7 million during the fourth quarter
of the fiscal year ended March 31, 2011, and recorded a decrease to cost of goods sold by $34.1 million in the
quarter ended June 30, 2011, and an increase to cost of goods sold by $3.4 million in the remainder of fiscal year
2012. As a result, net income and net income per share for the quarter and year ended March 31, 2011 was reduced
by $30.7 million and $0.17 per share, respectively, with net income and net income per share in the quarter ended
June 30, 2011 increasing by $34.1 million and $0.19 per share, respectively, and net income and net income per share
in the remainder of fiscal year 2012 decreasing by $3.4 million and $0.02 per share, respectively. In conjunction
with recording of the adjustments related to this restatement, we recorded other immaterial corrections to the
consolidated financial statements or financial information included in this Form 10-K for the fiscal years ended
March 31, 2013, 2012, 2011 and 2010. For further discussion of the Audit Committee investigation, see Note 2,
Restatement and Revision of Previously Issued Financial Statements, to the Consolidated Financial Statements
included in Part II—Item 8, Financial Statements and Supplementary Data.
The Audit Committee has completed its independent investigation and found that, in connection with its
quarterly close processes, up until June 2013, the finance organization would compile lists of financial items,
which included significant accounting entries recorded during the quarter, late accounting entries, disclosure
items and certain other items with potential accounting implications. The lists used to track these financial items
appear to have been primarily shared within certain parts of the finance organization and were not shared with our
independent registered public accounting firm. Typically, there were between approximately thirty to fifty items
per quarter on these lists and there were multiple versions of these lists per quarter, as items were added, removed
and changed. Some of the items on the list were discussed with our independent registered public accounting firm
while others were not.
As part of the independent investigation, it was determined that nine historical items from these lists during
a five year period should have been recorded in an earlier period or a different amount should have been recorded.
The largest item relates to the now-discontinued Revue product and is the cause for the restatement. Two items—
the warranty accrual and the amortization of certain intangible assets—were on the lists in prior periods and were
not addressed in a timely manner before we corrected them in our revised Form 10-K/A filed on August 7, 2013.
Certain former finance employees signed the May 30, 2013 management representation letter to our independent
registered public accounting firm without disclosing these issues and, as a result, the management representation
letter was inaccurate on this point. Six items are not material individually or in aggregate to any of the annual or
interim periods reported but are nevertheless being corrected in these restated consolidated financial statements.
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