Netgear 2006 Annual Report Download - page 50

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Table of Contents
NETGEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — The Company and Summary of Significant Accounting Policies:
The Company
NETGEAR, Inc. (“NETGEAR” or the “Company”) was incorporated in Delaware in January 1996. The
Company designs, develops and markets networking products for small business, which the Company defines as a
business with fewer than 250 employees, and home users. The Company focuses on satisfying the
ease-of-use, quality, reliability, performance and affordability requirements of these users. The Company’s product
offerings enable users to share Internet access, peripherals, files, digital multimedia content and applications among
multiple personal computers, or PCs, and other Internet-enabled devices. The Company sells products primarily
through a global sales channel network, which includes traditional retailers, online retailers, direct market resellers,
or DMRs, value added resellers, or VARs, and broadband service providers.
Basis of presentation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned
subsidiaries. All inter-company accounts and transactions have been eliminated in the consolidation of these
subsidiaries. Certain reclassifications have been made to prior period reported amounts to conform to current year
presentation.
Fiscal periods
The Company’s fiscal year begins on January 1 of the year stated and ends on December 31 of the same year.
The Company reports its results on a fiscal quarter basis rather than on a calendar quarter basis. Under the fiscal
quarter basis, each of the first three fiscal quarters ends on the Sunday closest to the calendar quarter end, with the
fourth quarter ending on December 31.
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 disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual results could differ from those
estimates.
Cash and cash equivalents
The Company considers all highly liquid investments with a maturity at the time of purchase of three months or
less to be cash equivalents. The Company deposits cash and cash equivalents with high credit quality financial
institutions.
Short-term investments
Short-term investments comprise marketable securities that consist of government securities with an original
maturity or a remaining maturity at the time of purchase, of greater than three months and less than twelve months.
All marketable securities are held in the Company’s name with two high quality financial institutions, who act as the
Company’s custodians and investment managers. All of the Company’s marketable securities are classified as
available-for-sale securities in accordance with the provisions of Statement of Financial Accounting Standards
(“SFAS”) No. 115, “Accounting For Certain Investments in Debt and Equity Securities” and are carried at fair value
with unrealized gains and losses reported as a separate component of stockholders’ equity.
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