Logitech 2015 Annual Report Download - page 194

LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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. 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 essential 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 available; or (iii) ESP (best estimate of selling price), if neither VSOE nor
TPE are available. Management judgment must be used to determine the appropriate deliverables and
associated relative selling prices. The Company has identified the Lifesize video conferencing products
as products sold with software components that qualify as multiple-deliverable revenue arrangements.
Lifesize products include the following deliverables:
Non-software deliverables
• Hardware with software essential to the functionality of the hardware device delivered at time
of sale
• Maintenance for hardware with essential software, including future when-and-if-available
unspecified upgrades
• Other services, including training and installation
Note 2—Summary of Significant Accounting Policies (Continued)
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Annual Report Fiscal Year 2015