Logitech 2014 Annual Report Download - page 170

Applicable to Both Reporting Units
We continue to evaluate and monitor all key factors impacting the carrying value of our recorded goodwill, as
well as other long-lived assets. There are a number of uncertainties associated with the key assumptions described
above based primarily on the difficulty of predicting our revenues and profitability. Our revenues and profitability
are difficult to predict due to the nature of the markets in which we compete, fluctuating end-user demand, the
uncertainty of current and future global economic conditions, and for many other reasons, including, but not
limited to:
• Our revenues are impacted by consumer demand and future global conditions, which could fluctuate
abruptly and significantly during periods of uncertain economic conditions or geographic distress, as
well as from shifts in consumer buying patterns.
• We must incur a large portion of our costs in advance of sales orders, because we must plan research and
production, order components, buy tooling equipment, and enter into development, sales and marketing,
and other operating commitments prior to obtaining firm commitments from our customers. This makes
it difficult for us to rapidly adjust our costs in response to a revenue shortfall.
• Fluctuations in currency exchange rates can impact our revenues, expenses and profitability because
we report our financial statements in U.S. dollars, whereas a significant portion of our revenues and
expenses are in other currencies.
• The peripherals industry is characterized by short product life cycles, frequent new product introductions,
rapidly changing technology, dynamic consumer demand and evolving industry standards. As a result,
we must continually innovate in our new and existing product categories, introduce new products and
technologies, and enhance existing products in order to remain competitive.
• The video conferencing industry is characterized by continual performance enhancements and large,
well-financed competitors. There is increased participation in the video conferencing market by
companies such as Cisco Systems, Inc. and Polycom, Inc., and as a result, we expect competition in the
industry to further intensify.
Should the actual outcome of some or all of these assumptions differ significantly from the current
assumptions, revisions to current cash flow assumptions could cause the fair value of the reporting units to be
significantly different in future periods.
Product Warranty Accrual
We provide for the estimated cost of product warranties at the time the related revenue is recognized based
on historical and projected warranty claim rates, historical and projected cost, and knowledge of specific product
failures that are outside of our typical experience. Each quarter, we reevaluate our estimates to assess the adequacy of
our recorded warranty liabilities considering the size of the installed base of products subject to warranty protection
and adjust the amounts as necessary. If actual product failure rates or repair costs differ from estimates, revisions to
the estimated warranty liabilities would be required and could materially affect our results of operations.
Results of Operations
We have revised our results of operations for the fiscal year ended March 31, 2013 and restated our results
of operations for the fiscal year ended March 31, 2012. The restatement reflects the results of the independent
investigation by the Audit Committee and other corrections identified by the management to the financial
statements. For more information, refer to Note 2 of our Notes to Consolidated Financial Statements in Item 8.
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