NVIDIA 2009 Annual Report Download - page 111

NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Accrual for estimated product returns and product warranty liabilities
We record a reduction to revenue for estimated product returns at the time revenue is recognized primarily based on historical
return rates. Cost of revenue includes the estimated cost of product warranties that are calculated at the point of revenue recognition.
Under limited circumstances, we may offer an extended limited warranty to customers for certain products. Additionally, we accrue
for known warranty and indemnification issues if a loss is probable and can be reasonably estimated. The estimated product returns
and estimated product warranty liabilities for fiscal years 2009, 2008 and 2007 are as follows:
January 25,
2009
January 27,
2008
January 28,
2007
(In thousands)
Balance at beginning of period $ 24,432 $ 17,959 $ 10,239
Additions (1),(4) 217,114 27,763 40,515
Deductions (2),(5) (73,579) (21,290) (32,795)
Balance at end of period (3) $ 167,967 $ 24,432 $ 17,959
(1) Includes $27.9 million, $25.5 million and $37.0 million, respectively, for fiscal years 2009, 2008 and 2007, towards allowance for
sales returns estimated at the time revenue is recognized primarily based on historical return rates and is charged as a reduction to
revenue.
(2) Includes $29.2 million, $21.3 million and $32.8 million, respectively, for fiscal years 2009, 2008 and 2007, written off against
allowance for sales returns.
(3) Includes $17.3 million, $18.7 million and $14.5 million, respectively, as of January 25, 2009, January 27, 2008 and January 28,
2007 relating to allowance for sales returns.
(4) Includes $196.0 million for fiscal year 2009 for incremental repair and replacement costs from a weak die/packaging material set,
offset by $6.7 million for fiscal year 2009 related to the reimbursement of claims received from an insurance provider that were
allocated to cost of revenue.
(5) Includes $43.6 million for fiscal year 2009 in deductions towards warranty accrual associated with incremental repair and
replacement costs from a weak die/packaging material set.
In connection with certain agreements that we have executed in the past, we have at times provided indemnities to cover the
indemnified party for matters such as tax, product and employee liabilities. We have also on occasion included intellectual property
indemnification provisions in our technology related agreements with third parties. Maximum potential future payments cannot be
estimated because many of these agreements do not have a maximum stated liability. As such, we have not recorded any liability in
our Consolidated Financial Statements for such indemnifications. FASB Interpretation No. 45, or FIN 45, Guarantor’s Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, requires that upon issuance of
a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee. In addition,
FIN 45 requires disclosures about the guarantees that an entity has issued, including a tabular reconciliation of the changes of the
entity’s product warranty liabilities.
Note 12 - Financial Arrangements, Commitments and Contingencies
Inventory Purchase Obligations
At January 25, 2009 and January 27, 2008, we had outstanding inventory purchase obligations totaling $290.7 million and
$651.6 million, respectively.
Capital Purchase Obligations
At January 25, 2009 and January 27, 2008, we had outstanding capital purchase obligations totaling $20.3 million and $11.8
million, respectively.
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Source: NVIDIA CORP, 10-K, March 13, 2009 Powered by Morningstar® Document Research℠