Logitech 2015 Annual Report Download - page 198

LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Allowances for Doubtful Accounts
Allowances for doubtful accounts are maintained for estimated losses resulting from the inability
of the Company’s customers to make required payments. The allowances are based on the Company’s
regular assessment of the credit worthiness and financial condition of specific customers, as well as
its historical experience with bad debts and customer deductions, receivables aging, current economic
trends, geographic or country-specific risks and the financial condition of its distribution channels.
Inventories
Inventories are stated at the lower of cost or market. Costs are computed under the standard
cost method, which approximates actual costs determined on the first-in, first-out basis. The Company
records write-downs of inventories which are obsolete or in excess of anticipated demand or market
value based on a consideration of marketability and product life cycle stage, product development plans,
component cost trends, demand forecasts, historical net sales, and assumptions about future demand
and market conditions.
As of March 31, 2015 and 2014, the Company also recorded a liability of $9.8 million and $9.2 million,
respectively, arising from firm, non-cancelable, and unhedged inventory purchase commitments in excess
of anticipated demand or market value consistent with its valuation of excess and obsolete inventory.
Such liability is included in accrued and other current liabilities.
Investments
The Company’s investment securities portfolio consists of bank time deposits with an original
maturity of three months or less and marketable securities (money market and mutual funds) related to a
deferred compensation plan.
The bank time deposits are classified as cash equivalents and are recorded at cost, which
approximates fair value.
The marketable securities related to the deferred compensation plan are classified as non-current
trading investments, as they are intended to fund the deferred compensation plan long-term liability. Since
participants in the deferred compensation plan may select the mutual funds in which their compensation
deferrals are invested within the confines of the Rabbi Trust which holds the marketable securities, the
Company has designated these marketable securities as trading investments, although there is no intent
to actively buy and sell securities within the objective of generating profits on short-term differences in
market prices. These securities are recorded at fair value based on quoted market prices. Earnings, gains
and losses on trading investments are included in other income (expense), net.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Additions and improvements are capitalized,
and maintenance and repairs are expensed as incurred. The Company capitalizes the cost of software
developed for internal use in connection with major projects. Costs incurred during the feasibility stage
are expensed, whereas direct costs incurred during the application development stage are capitalized.
Note 2—Summary of Significant Accounting Policies (Continued)
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Annual Report Fiscal Year 2015