Plantronics 2010 Annual Report Download - page 52

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44
Revenue Recognition
Revenue from sales of products to customers is recognized when the following criteria have been met:
· title and risk of ownership are transferred to customers;
· persuasive evidence of an arrangement exists;
· the price to the buyer is fixed or determinable; and
· collection is reasonably assured.
We assess collectibility based on a customer’s credit quality as well as subjective factors and trends including historical experience,
the age of any existing accounts receivable balances, and geographic or country-specific risks and economic conditions that may affect
a customer’s ability to pay. We defer revenue but recognize related cost of revenues if collectibility cannot be reasonably assured.
We recognize revenue net of estimated product returns and expected payments to resellers for customer programs including
cooperative advertising, marketing development funds, volume rebates, and special pricing programs.
Estimated product returns are deducted from revenues upon shipment, based on historical return rates, assumptions regarding the rate
of sell-through to end users from our various channels based on historical sell-through rates and other relevant factors. Such estimates
may need to be revised and could have an adverse impact on revenues if product lives vary significantly from management estimates,
a particular selling channel experiences a higher than estimated return rate, or sell-through rates are slower causing inventory build-up.
Cooperative advertising and marketing development funds are accounted for in accordance with the Revenue Recognition Topic of the
FASB ASC. Under these guidelines, we accrue for these funds as marketing expense if we receive a separately identifiable benefit in
exchange and can reasonably estimate the fair value of the identifiable benefit received; otherwise, the amount is recorded as a
reduction to revenues.
Reductions to revenue for expected and actual payments to resellers for volume rebates and pricing protection are based on actual
expenses incurred during the period, estimates for what is due to resellers for estimated credits earned during the period and any
adjustments for credits based on actual activity. If the actual payments exceed management’s estimates, this could result in an adverse
impact on our revenues. Since management has historically been able to reliably estimate the amount of allowances required for
future price adjustments and product returns, we recognize revenue, net of projected allowances, upon recognition of the related sale.
In situations where management is unable to reliably estimate the amount of future price adjustments and product returns, we defer
recognition of the revenue until the right to future price adjustments and product returns lapses, and we are no longer under any
obligation to reduce the price or accept the return of the product.
If market conditions warrant, we may take action to stimulate demand, which could include increasing promotional programs,
decreasing prices, or increasing discounts. Such actions could result in incremental reductions to revenue and margins at the time such
incentives are offered. To the extent that we reduce pricing, we may incur reductions to revenue for price protection based on
management’s estimate of inventory in the channel that is subject to such pricing actions.
Investments
The goals of our investment policy, in order of priority, are preservation of capital, maintenance of liquidity, diversification, and
maximization of after-tax investment income. Investments are limited to investment grade securities with limitations by policy on the
percent of the total portfolio invested in any one issue. All of our investments are held in our name at a limited number of major
financial institutions. Cash equivalents have a remaining maturity of three months or less at the date of purchase; short-term securities
have a remaining maturity of greater than three months at the date of purchase; and long-term investments have maturities greater than
one year or we do not currently have the ability to liquidate the investment. As a result of the uncertainties in the credit markets and
the UBS Bank right offer, as of March 31, 2009, the Company had classified all of its ARS investments as long-term since these
investments were not currently liquid, and the Company would not be able to access these funds until a future auction of these
investments is successful, the underlying securities are redeemed by the issuer, or a buyer is found outside of the auction process. As
of March 31, 2010, our ARS portfolio is classified as short-term trading securities due to management’s intent to exercise our put
option with UBS and our expectation that the ARS will be sold within twelve months with any unrealized losses recorded to Interest
and other income (expense), net.