iRobot 2007 Annual Report Download - page 100

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Short Term Investments
The Company’s investments are classified as available-for-sale and are recorded at fair value with any
unrealized gain or loss recorded as an element of stockholders’ equity. The fair value of investments is determined
based on quoted market prices at the reporting date for those instruments. As of December 29, 2007, and
December 30, 2006, investments consisted of:
Cost
Fair
Market Value Cost
Fair
Market Value
December 29,
2007
December 30,
2006
(In thousands)
Auction Rate Debt Securities ............... $16,550 $16,550 $64,800 $64,800
As of December 29, 2007, the Company’s investments had maturity dates ranging from February 2025 to June
2047. Despite the long-term contractual maturities of the auction rate securities held at December 29, 2007, all of
these securities were available for sale and it was the Company’s intention to liquidate these securities within one
year. Subsequent to December 29, 2007, the $16.6 million of auction rate securities held at December 29, 2007 have
been liquidated.
Revenue Recognition
The Company derives its revenue from product sales, government research and development contracts and
commercial research and development contracts. The Company sells products directly to customers and indirectly
through resellers and distributors. The Company recognizes revenue from sales of consumer robots under the terms
of the customer agreement upon transfer of title to the customer, net of estimated returns, provided that collection is
determined to be probable and no significant obligations remain. Sales to resellers are subject to agreements
allowing for limited rights of return for defective products only, rebates and price protection. The Company has
typically not taken product returns except for defective products. Accordingly, the Company reduces revenue for its
estimates of liabilities for these rights at the time the related sale is recorded. The Company makes an estimate of
sales returns for products sold by resellers directly or through its distributors based on historical returns experience.
The Company has aggregated and analyzed historical returns from resellers and end users which form the basis of its
estimate of future sales returns by resellers or end users. In accordance with Statement of Financial Accounting
Standards No. 48, “Revenue Recognition When Right of Return Exists,” the provision for these estimated returns is
recorded as a reduction of revenue at the time that the related revenue is recorded. If actual returns differ
significantly from its estimates, such differences could have a material impact on the Company’s results of
operations for the period in which the returns become known. The estimates for returns are adjusted periodically
based upon historical rates of returns. The estimates and reserve for rebates and price protection are based on
specific programs, expected usage and historical experience. Actual results could differ from these estimates.
Under cost-plus-fixed-fee (CPFF) type contracts, the Company recognizes revenue based on costs incurred
plus a pro rata portion of the total fixed fee. Revenue on firm fixed price (FFP) contracts is recognized using the
percentage-of-completion method. Costs and estimated gross profits on contracts are recorded as revenue as work is
performed based on the percentage that incurred costs bear to estimated total costs utilizing the most recent
estimates of costs and funding. Changes in job performance, job conditions, and estimated profitability, including
those arising from final contract settlements, may result in revisions to costs and income and are recognized in the
period in which the revisions are determined. Since many contracts extend over a long period of time, revisions in
cost and funding estimates during the progress of work have the effect of adjusting earnings applicable to past
performance in the current period. When the current contract estimate indicates a loss, provision is made for the
total anticipated loss in the current period. Revenue earned in excess of billings, if any, is recorded as unbilled
revenue. Billings in excess of revenue earned, if any, are recorded as deferred revenue.
66
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)