NVIDIA 2015 Annual Report Download - page 157

NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
77
Note 10 - Guarantees
U.S. GAAP 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, U.S. GAAP requires disclosures about the guarantees that an entity
has issued, including a tabular reconciliation of the changes of the entity’s product warranty liabilities.
Accrual for 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. 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. During periods prior to fiscal year 2013, we
recorded a cumulative net charge of $475.9 million, most of which was charged against cost of revenue, to cover customer
warranty, repair, return, replacement and other costs arising from a weak die/packaging material set in certain versions of
our previous generation MCP and GPU products used in notebook configurations. During fiscal year 2014, we released the
remaining $7.8 million unclaimed balance of that warranty accrual.
The estimated product returns and estimated product warranty liabilities for fiscal years 2015, 2014 and 2013 are as
follows:
January 25,
2015 January 26, 2014 January 27, 2013
(In thousands)
Balance at beginning of period (1) ....................................................... $ 7,571 $ 14,874 $ 18,406
Additions............................................................................................... 5,441 6,786 5,738
Deductions (2) ...................................................................................... (5,489)(14,089)(9,270)
Balance at end of period ....................................................................... $ 7,523 $ 7,571 $ 14,874
(1) Includes a balance of $9.6 million and $13.2 million for fiscal years 2014 and 2013, respectively, for the remaining
amount of the warranty accrual associated with incremental repair and replacement costs from a weak die/packaging
material set, which we recorded prior to fiscal year 2013.
(2) Includes $1.8 million and $3.0 million for fiscal years 2014 and 2013, respectively, in payments related to weak die/
packaging set warranty accrual recorded prior to fiscal year 2013, and $7.8 million related to the release of the final
unclaimed portion of that accrual during fiscal year 2014.
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.
Note 11 - Long-Term Debt
1.00 % Convertible Senior Notes Due 2018
On December 2, 2013, we issued $1.50 billion of the Notes. The Notes are unsecured, unsubordinated obligations of
the Company, which pay interest in cash semi-annually at a rate of 1.00% per annum. The Notes will mature on December
1, 2018 unless earlier repurchased or converted in accordance with their terms prior to such date. The Notes may be converted,
under the conditions specified below, based on an initial conversion rate of 49.60 shares of common stock per $1,000