Plantronics 2015 Annual Report Download - page 61

The fair value of Level 2 investment securities is determined based on other observable inputs, including multiple non-binding
quotes from independent pricing services. Non-binding quotes are based on proprietary valuation models that are prepared by the
independent pricing services and use algorithms based on inputs such as observable market data, quoted market prices for similar
securities, issuer spreads, and internal assumptions of the broker. The Company corroborates the reasonableness of non-binding
quotes received from the independent pricing services using a variety of techniques depending on the underlying instrument,
including: (i) comparing them to actual experience gained from the purchases and maturities of investment securities, (ii) comparing
them to internally developed cash flow models based on observable inputs, and (iii) monitoring changes in ratings of similar
securities and the related impact on fair value. The fair value of Level 2 derivative foreign currency contracts is determined using
pricing models that use observable market inputs.
Revenue Recognition
The Company sells substantially all of its products to end users through distributors, retailers, and carriers. The Company's revenue
is derived from the sale of headsets, telephone headset systems, and accessories for the business and consumer markets and is
recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the sales
price is fixed or determinable, and collection is reasonably assured. These criteria are usually met at the time of product shipment;
however, the Company defers revenue when any significant obligations remain and to date this has accounted for less than 1% of
the Company's net revenues. Customer purchase orders and/or contracts are used to determine the existence of an arrangement.
Product is considered delivered once it has been shipped and title and risk of loss have been transferred to the customer. The
Company assesses whether a price is fixed or determinable based upon the selling terms associated with the transaction and whether
the sales price is subject to refund or adjustment. The Company assesses collectibility based on a customer's credit quality, historical
experience, and geographic or country-specific risks and economic conditions that may affect a customer's ability to pay.
Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes
recorded as current liabilities until remitted to the relevant government authority. Shipping and handling costs incurred in connection
with the sale of products are included in cost of revenues.
Sales through retail and distribution channels are made primarily under agreements or commitments allowing for rights of return
and include various sales incentive programs, such as rebates, advertising, price protection, and other sales incentives. The
Company has an established sales history for these arrangements and records the estimated reserves and allowances at the time
the related revenue is recognized. Sales return reserves are estimated based on historical data, relevant current data, and the
monitoring of inventory build-up in the distribution channel. The allowance for sales incentive programs is based on contractual
terms or commitments and historical experience in the form of lump sum payments or sell-through credits.
When a sales arrangement contains multiple elements, such as hardware and software products and/or services, the Company
allocates revenue to each element based on relative selling prices. The selling price for a deliverable is based on its vendor specific
objective evidence ("VSOE"), if available, third party evidence ("TPE") if VSOE is not available, or estimated selling price ("ESP")
if neither VSOE nor TPE is available. In multiple element arrangements where more-than-incidental software deliverables are
included, the Company allocates revenue to each separate unit of accounting for each of the non-software deliverables and to the
software deliverables as a group using the relative selling prices of each of the deliverables in the arrangement based on the
aforementioned selling price hierarchy.
Advertising Costs
The Company expenses all advertising costs as incurred. Advertising expense for the years ended March 31, 2015, 2014, and
2013 was $3.7 million, $4.0 million, and $3.6 million, respectively.
Income Taxes
Deferred income taxes are determined based on the differences between the financial reporting and tax bases of assets and liabilities
and are measured using the currently enacted tax rates and laws. The Company records a valuation allowance against particular
deferred income tax assets if it is more likely than not that those assets will not be realized. The provision for income taxes
comprises the Company's current tax liability and changes in deferred income tax assets and liabilities.
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