Medtronic 2009 Annual Report Download - page 57

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53
Medtronic, Inc.
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Nature of Operations Medtronic, Inc. (Medtronic or the Company)
is the global leader in medical technology—alleviating pain,
restoring health, and extending life for millions of people around
the world. The Company provides innovative products and
therapies for use by medical professionals to meet the healthcare
needs of their patients. Primary products include those for cardiac
rhythm disorders, cardiovascular disease, neurological disorders,
spinal conditions and musculoskeletal trauma, urological
and digestive disorders, diabetes and ear, nose and throat
conditions.
The Company is headquartered in Minneapolis, Minnesota,
and markets its products primarily through a direct sales force
in the United States (U.S.) and a combination of direct sales
representatives and independent distributors in international
markets. The primary markets for products are the U.S., Western
Europe and Japan.
Principles of Consolidation The consolidated financial statements
include the accounts of Medtronic, Inc., and all of its subsidiaries.
All significant intercompany transactions and accounts have been
eliminated. The principles of Financial Accounting Standards
Board (FASB) Interpretation (FIN) No. 46 (revised December 2003),
“Consolidation of Variable Interest Entities” and Accounting
Research Bulletin (ARB) No. 51, “Consolidated Financial Statements”
are considered when determining whether an entity is subject to
consolidation.
Fiscal Year-End The Company utilizes a fifty-two/fifty-three week
fiscal year, ending the last Friday in April. The Company’s fiscal
years 2009, 2008 and 2007 ended on April 24, 2009, April 25, 2008
and April 27, 2007, respectively, all of which were fifty-two week
years. Fiscal year 2010 will be a fifty-three week year.
Use of Estimates The preparation of the financial statements in
conformity with accounting principles generally accepted in the
U.S. (U.S. GAAP) requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ
materially from those estimates.
Cash Equivalents The Company considers highly liquid investments
with maturities of three months or less from the date of purchase
to be cash equivalents. These investments are carried at cost,
which approximates fair value.
Investments Investments in marketable equity securities and debt
securities are classified and accounted for as available-for-sale
(AFS) at April 24, 2009 and April 25, 2008. AFS debt securities are
recorded at fair value in both short-term and long-term investments
and marketable equity securities are recorded at fair value in
long-term investments on the consolidated balance sheets. The
change in fair value for AFS securities is recorded, net of taxes,
as a component of accumulated other comprehensive (loss)/income
on the consolidated balance sheets. Management determines
the appropriate classification of its investments in debt and
equity securities at the time of purchase and reevaluates such
determinations at each balance sheet date.
Certain of the Company’s investments in equity and other
securities are long-term, strategic investments in companies that
are in varied stages of development. The Company accounts
for these investments under the cost or the equity method of
accounting, as appropriate. The valuation of equity and other
securities accounted for under the cost method considers all
available financial information related to the investee, including
valuations based on recent third-party equity investments in the
investee. If an unrealized loss for any investment is considered
to be other-than-temporary, the loss will be recognized in
the consolidated statements of earnings in the period the
determination is made. Equity securities accounted for under
the equity method are initially recorded at the amount of
the Company’s investment and adjusted each period for the
Company’s share of the investee’s income or loss and dividends
paid. Equity securities accounted for under both the cost
and equity methods are reviewed quarterly for changes in
circumstance or the occurrence of events that suggest the
Company’s investment may not be recoverable. See Note 5
for discussion of the gains and losses recognized on equity and
other securities.
Accounts Receivable The Company grants credit to customers in
the normal course of business, but generally does not require
collateral or any other security to support its receivables. The
Company maintains an allowance for doubtful accounts for
potential credit losses. Uncollectible accounts are written-off
against the allowance when it is deemed that a customer account
is uncollectible. The allowance for doubtful accounts was $61
million at April 24, 2009 and $99 million at April 25, 2008.