iRobot 2007 Annual Report Download - page 99

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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of the Business
iRobot Corporation, formerly IS Robotics, Inc., was incorporated in 1990 to develop robotics and artificial
intelligence technologies and apply these technologies in producing and marketing robots. The majority of the
Company’s revenue is generated from product sales, and government and industrial research and development
contracts.
The Company is subject to risks common to companies in high-tech industries including, but not limited to,
uncertainty of progress in developing technologies, new technological innovations, dependence on key personnel,
protection of proprietary technology, compliance with government regulations, uncertainty of market acceptance of
products and the need to obtain financing, if necessary.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include those of iRobot and our subsidiaries, after
elimination of all intercompany accounts and transactions. iRobot has prepared the accompanying consolidated
financial statements in conformity with accounting principles generally accepted in the United States of America.
Use of Estimates
The preparation of these financial statements in conformity with accounting principles generally accepted in
the United States of America requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. On an
ongoing basis, management evaluates these estimates and judgments, including those related to revenue recog-
nition, sales returns, bad debts, warranty claims, inventory reserves, valuation of investments and income taxes. The
Company bases these estimates on historical and anticipated results and trends and on various other assumptions
that the Company believes are reasonable under the circumstances, including assumptions as to future events. These
estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual
results may differ from the Company’s estimates.
Reclassification
Certain reclassifications have been made to the prior year financial statements to conform to the current year
presentation.
Fiscal Year-End
Beginning in fiscal 2005, the Company operates and reports using a 52-53 week fiscal year ending on the
Saturday closest to December 31. Accordingly, the Company’s fiscal quarters will end on the Saturday that falls
closest to the last day of the third month of each quarter.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original or remaining maturity of three months or
less at the time of purchase to be cash equivalents. The Company invests its excess cash primarily in money market
funds of major financial institutions. Accordingly, its cash equivalents are subject to minimal credit and market risk.
At December 29, 2007 and December 30, 2006, cash equivalents were comprised of money market funds totaling
$23.3 million and $3.8 million, respectively. These cash equivalents are carried at cost, which approximates fair
value.
65
Form 10-K