Logitech 2014 Annual Report Download - page 252

LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 3 — Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of Logitech and its subsidiaries. All intercompany
balances and transactions have been eliminated. The consolidated financial statements are presented in accordance
with U.S. GAAP (accounting principles generally accepted in the United States of America).
Fiscal Year
The Company’s fiscal year ends on March 31. Interim quarters are thirteen-week periods, each ending on a
Friday. For purposes of presentation, the Company has indicated its quarterly periods as ending on the month end.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make
judgments, estimates and assumptions that affect reported amounts of assets, liabilities, net sales and expenses,
and the disclosure of contingent assets and liabilities. Examples of significant estimates and assumptions made by
management involve the fair value of goodwill, warranty liabilities, accruals for discretionary customer programs,
sales return reserves, allowance for doubtful accounts, inventory valuation, uncertain tax positions, and valuation
allowances for deferred tax assets. Although these estimates are based on management’s best knowledge of current
events and actions that may impact the Company in the future, actual results could differ from those estimates.
Foreign Currencies
The functional currency of the Company’s operations is primarily the U.S. Dollar. To a lesser extent, certain
operations use the Euro, Chinese Renminbi, Swiss Franc, or other local currencies as their functional currencies.
The financial statements of the Company’s subsidiaries whose functional currency is other than the U.S. Dollar
are translated to U.S. Dollars using period-end rates of exchange for assets and liabilities and monthly average
rates for net sales, income and expenses. Cumulative translation gains and losses are included as a component of
shareholders’ equity in accumulated other comprehensive income/(loss). Gains and losses arising from transactions
denominated in currencies other than a subsidiary’s functional currency are reported in other income (expense), net
in the consolidated statements of operations.
Revenue Recognition
Revenues are recognized when all of the following criteria are met:
• evidence of an arrangement between the Company and the customer exists;
• delivery has occurred and title and risk of loss has transferred to the customer;
• the price of the product is fixed or determinable; and
• collectability of the receivable is reasonably assured.
For sales of most hardware peripherals products and hardware bundled with software incidental to its
functionality, these criteria are met at the time delivery has occurred and title and risk of loss have transferred to
the customer.
The Company’s video conferencing segment has multiple-deliverable revenue arrangements that include both
undelivered software elements and hardware with software essential to its functionality. The Company uses the
following hierarchy to determine the relative selling price for allocating revenue to the deliverables: (i) VSOE
(vendor specific objective evidence) of fair value, if available; (ii) TPE (third party evidence), if VSOE is not
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