Polaris 2014 Annual Report Download - page 80

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including goodwill, is less than its carrying amount. Refer to Note 5 for additional information regarding
goodwill and other intangible assets.
Revenue recognition. Revenues are recognized at the time of shipment to the dealer or distributor or other
customers. Product returns, whether in the normal course of business or resulting from repossession under the
Company’s customer financing program (see Note 8), have not been material. Polaris sponsors certain sales
incentive programs and accrues liabilities for estimated sales promotion expenses and estimated holdback
amounts that are recognized as reductions to sales when products are sold to the dealer or distributor
customer.
Sales promotions and incentives. Polaris provides for estimated sales promotion and incentive expenses, which
are recognized as a reduction to sales, at the time of sale to the dealer or distributor. Examples of sales
promotion and incentive programs include dealer and consumer rebates, volume incentives, retail financing
programs and sales associate incentives. Sales promotion and incentive expenses are estimated based on
current programs and historical rates for each product line. Actual results may differ from these estimates if
market conditions dictate the need to enhance or reduce sales promotion and incentive programs or if the
customer usage rate varies from historical trends. Historically, sales promotion and incentive expenses have
been within the Company’s expectations and differences have not been material.
Dealer holdback programs. Dealer holdback represents a portion of the invoiced sales price that is expected to
be subsequently returned to the dealer or distributor as a sales incentive upon the ultimate retail sale of the
product. Holdback amounts reduce the ultimate net price of the products purchased by Polaris’ dealers or
distributors and, therefore, reduce the amount of sales Polaris recognizes at the time of shipment. The portion
of the invoiced sales price estimated as the holdback is recognized as ‘‘dealer holdback’’ liability on the
Company’s balance sheet until paid or forfeited. The minimal holdback adjustments in the estimated holdback
liability due to forfeitures are recognized in net sales. Payments are made to dealers or distributors at various
times during the year subject to previously established criteria.
Shipping and handling costs. Polaris records shipping and handling costs as a component of cost of sales at the
time the product is shipped.
Research and development expenses. Polaris records research and development expenses in the period in which
they are incurred as a component of operating expenses.
Advertising expenses. Polaris records advertising expenses as a component of selling and marketing expenses in
the period in which they are incurred. In the years ended December 31, 2014, 2013, and 2012, Polaris incurred
$82,600,000, $73,945,000, and $58,752,000, respectively.
Product warranties. Polaris provides a limited warranty for its ORVs for a period of six months, for a period of
one year for its snowmobiles, for a period of one or two years for its motorcycles depending on brand and
model year, and for a two year period for SVs. Polaris provides longer warranties in certain geographical
markets as determined by local regulations and market conditions and may also provide longer warranties
related to certain promotional programs. Polaris’ standard warranties require the Company or its dealers to
repair or replace defective products during such warranty periods at no cost to the consumer. The warranty
reserve is established at the time of sale to the dealer or distributor based on management’s best estimate
using historical rates and trends. Adjustments to the warranty reserve are made from time to time as actual
claims become known in order to properly estimate the amounts necessary to settle future and existing claims
on products sold as of the balance sheet date. Factors that could have an impact on the warranty accrual in
any given period include the following: improved manufacturing quality, shifts in product mix, changes in
warranty coverage periods, snowfall and its impact on snowmobile usage, product recalls and any significant
changes in sales volume.
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