iRobot 2009 Annual Report Download - page 98

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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 January 2, 2010, and December 27,
2008, investments consisted of:
Cost
Fair
Market Value Cost
Fair
Market Value
January 2,
2010
December 27,
2008
(In thousands)
U.S. Government bond ....................... $5,000 $4,959 $— $—
As of January 2, 2010, the Company’s investment has a maturity date of March 2012.
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 home robots under the terms of
the customer agreement upon transfer of title and risk of loss 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 based on historical returns experience and other
relevant data. The Company’s international distributor agreements do not currently allow for product returns and, as
a result, no reserve for returns is established for this group of customers. 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. When a 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 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. For government product FFP contracts revenue is recognized as the product
is shipped or in accordance with the contract terms. Costs and estimated gross margins on contracts are recorded as
revenue as work is performed based on the percentage that incurred costs compare 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 and government audit, 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, a 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.
64
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)