Plantronics 2002 Annual Report Download - page 39

D epreciation and Amortization. Property and equipment are stated at cost less
a c c umulated depreciation and amortization. Depreciation and amortization are principally
calculated using the straight-line method over the estimated useful lives of the respective
assets. In accordance with our adoption of SFAS No. 142, “Goodwill and Other Intangible
A s s e t s , ” goodwill is not amortized for periods subsequent to April 1, 2001, but is tested
annually for impairment, or more often as deemed necessary. Identified intangible assets
are amortized over their estimated economic lives, which range from three to seven years.
Revenue Recognition. Revenue is recognized net of estimated product returns, exchanges,
credits for price protection, volume rebates, and sales incentive credits given to customers
in excess of the fair value of benefits received when products are shipped or upon delivery to
customers, depending on the terms of the sale, and when collectibility is reasonably assured.
We also provide for the estimated cost of repair or replacement products under warranty at
the time of sale.
Advertising Costs. We expense all advertising costs as incurred. Advertising expense,
which includes corporate and the fair value of cooperative advertising, for the years ended
March 31, 2000, 2001 and 2002 was $4.3 million, $6.7 million, and $2.5 million,
r e s p e c t i v e l y. Advertising expense for prior fiscal years has been restated in accordance
with EIT F 01-9 (see Recent Accounting Pronouncements section below).
Concentration of Credit Risk. Financial instruments that potentially subject Plantronics
to concentrations of credit risk consist principally of cash equivalents, marketable securities
and trade receivables. Our cash investment policies limit investments to those that are
short-term and low risk. Cash equivalents have an original maturity of ninety days or less;
marketable securities have an original maturity of greater than ninety days, but less than
one year. Concentrations of credit risk with respect to trade receivables are generally limited
due to the large number of customers that comprise our customer base, and their dispersion
across different geographies and markets. We perform ongoing credit evaluations of our
customers’ financial condition and generally require no collateral from our customers.
We maintain an allowance for uncollectible accounts receivable based upon expected
collectibility of all accounts receivable.
F air Value of F inancial Instruments. T he carrying value of our financial instruments,
including cash, cash equivalents, marketable securities, accounts receivable, accrued
expenses and liabilities, approximates fair value due to their short maturities.
Income Ta x e s . We account for income taxes under the liability method, which recognizes
deferred tax assets and liabilities for the expected future tax consequences of temporary
d i f ferences between the tax basis of assets and liabilities and their financial statement
reported amounts. We account for tax credits as a reduction of tax expense in the year in
which the credits reduce taxes payable.
F oreign Operations and Currency Translation. T he functional currency of the Mexican
manufacturing operations and European sales and logistics headquarters is the U.S. dollar.
A c c o r d i n g l y, all revenues and cost of sales related to foreign operations are recorded using
the U.S. dollar as functional currency. T he functional currency of our foreign sales and
marketing and research and development operations is the local currency of the respective
operations. T he assets and liabilities of the subsidiaries whose functional currencies are
other than the U.S. dollar are translated into U.S. dollars at the current exchange rate in
e ffect at the balance sheet date. Income and expense items are translated using the
average exchange rate for the period. Cumulative translation adjustments are included
in accumulated other comprehensive income (loss), which is reflected as a separate
c o mponent of stockholders’ equity. Foreign currency transaction gains and losses are
included in the results of operations.
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