Logitech 2015 Annual Report Download - page 197

LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Research and Development Costs
Costs related to research, design and development of products, which consist primarily of personnel,
product design and infrastructure expenses, are charged to research and development expense as they
are incurred.
Advertising Costs
Advertising costs are expensed as incurred. Advertising costs are recorded as either a marketing
and selling expense or a deduction from revenue. Advertising costs reimbursed by the Company to direct
or indirect customers must have an identifiable benefit and an estimable fair value in order to be classified
as an operating expense. If these criteria are not met, the cost is classified as a reduction of revenue.
Advertising costs during fiscal years 2015, 2014 and 2013 were $174.2 million, $161.2 million and $165.8
million, respectively.
Cash Equivalents
The Company considers all highly liquid instruments purchased with an original maturity of three
months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist
principally of cash and cash equivalents and accounts receivable. The Company maintains cash and
cash equivalents with various financial institutions to limit exposure with any one financial institution, but
is exposed to credit risk in the event of default by financial institutions to the extent that cash balances
with individual financial institutions are in excess of amounts that are insured.
The Company sells to large OEMs, distributors and retailers and, as a result, maintains individually
significant receivable balances with such customers. In fiscal years 2015, 2014 and 2013, one customer
in the peripherals operating segment represented 14%, 14% and 11% of the Company’s total net sales,
respectively. No other customer represented more than 10% of the Company’s total net sales during fiscal
years 2015, 2014 or 2013. As of March 31, 2015 and 2014, one customer represented 12% and 14% of
total accounts receivable, respectively. No other customer represented more than 10% of the Company’s
total accounts receivable at either March 31, 2015 or 2014. Typical payment terms require customers
to pay for product sales generally within 30 to 60 days; however terms may vary by customer type, by
country and by selling season. Extended payment terms are sometimes offered to a limited number of
customers during the second and third fiscal quarters. The Company does not modify payment terms on
existing receivables.
The Company’s OEM customers tend to be well-capitalized multi-national companies, while
distributors and key retailers may be less well-capitalized. The Company manages its accounts receivable
credit risk through ongoing credit evaluation of its customers’ financial condition. The Company generally
does not require collateral from its customers.
Note 2—Summary of Significant Accounting Policies (Continued)
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Annual Report Fiscal Year 2015