NVIDIA 2004 Annual Report Download - page 39

Principles of Consolidation
Our consolidated financial statements include the accounts of NVIDIA Corporation and its wholly owned subsidiaries. All material
intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. On an on−going basis, we evaluate our estimates, including those
related to revenue recognition, accounts receivable, inventories and income taxes. These estimates are based on historical facts and
various other assumptions that we believe are reasonable.
Cash and Cash Equivalents
We consider all highly liquid investments purchased with a maturity of three months or less at the time of purchase to be cash
equivalents. As of January 25, 2004, our cash and cash equivalents were $214.4 million, which consists of $143.7 million invested in
money market funds.
Marketable Securities
We account for our investment instruments in accordance with Statement of Financial Accounting Standards No. 115, or SFAS No.
115, Accounting for Certain Investments in Debt and Equity Securities. All of our cash equivalents and marketable securities are
treated as "available−for−sale" under SFAS No. 115. Cash equivalents consist of financial instruments which are readily convertible
into cash and have original maturities of three months or less at the time of acquisition. Marketable securities consist of highly liquid
investments with a maturity of greater than three months when purchased. We classify our marketable debt securities at the date of
acquisition in the available−for−sale category as our intention is to convert them into cash for operations. These securities are reported
at fair value with the related unrealized gains and losses included in accumulated other comprehensive income, a component of
stockholders’ equity, net of tax. Realized gains and losses on the sale of marketable securities are determined using the
specific−identification method.
Inventories
Inventories are stated at the lower of cost, on a weighted average basis, or market. Write−downs to reduce the carrying value of
obsolete, slow moving and non−usable inventory to net realizable value are charged to cost of revenue.
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NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using the straight−line method based on estimated useful lives,
generally three to five years. Depreciation expense includes the amortization of assets recorded under capital leases. Leasehold
improvements and assets recorded under capital leases are amortized over the shorter of the lease term or the estimated useful life of
the asset.
Debt Financing Costs
In connection with our convertible subordinated debenture, see Note 13, we incurred certain direct issuance costs from third parties
who performed services that assisted in the closing of the transaction. These issuance costs were included in our consolidated balance
sheet under "deposits and other assets" and were amortized on a straight line basis over the term of the financing. On October 24,
2003, we fully redeemed the convertible subordinated debenture. In connection with the redemption, we recorded a $13.1 million
charge, which included $5.5 million of unamortized issuance costs.
Advertising Expenses
We expense advertising costs in the period in which they are incurred. Advertising expenses for fiscal 2004, 2003 and 2002 were
approximately $11.3 million, $6.8 million and $4.6 million, respectively.
Stock Split
In August 2001, our Board of Directors approved a two−for−one stock split of our common stock for stockholders of record on