Avnet 2015 Annual Report Download - page 53

TableofContents
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

limittheCompany’sexposuretoindividualandaggregateclaimsmade.Liabilitiesfortheseprogramsareestimatedbasedupon
outstandingclaimsandclaimsestimatedtobeincurredbutnotyetreportedbaseduponhistoricallossexperience.Theseestimates
aresubjecttovariabilityduetochangesintrendsoflossesforoutstandingclaimsandincurredbutnotreportedclaims,including
externalfactorssuchasthenumberofandcostofclaims,benefitlevelchangesandclaimsettlementpatterns.
Revenue recognition — Revenue from the sale of products or services is recognized when persuasive evidence of an
arrangement exists, delivery has occurred or services have been rendered, the sales price is fixed or determinable and
collectabilityisreasonably assured. Generally, thesecriteriaaremetuponeither shipment ordeliverytocustomers,depending
uponthesalesterms.AmajorityoftheCompany’sproductsalescomefromproductsAvnetpurchasesfromasupplierandholds
ininventory.AportionoftheCompany’ssalesofproductsareshippeddirectlyfromitssupplierstoitscustomers(“drop-ship”).
Insuchdrop-shiparrangements,Avnetnegotiatesthepricewiththecustomer,paysthesupplierdirectlyfortheproductsshipped
andbearscreditriskofcollectingpaymentfromitscustomers.Furthermore,insuchdrop-shipmentarrangements,theCompany
bearsresponsibility foracceptingreturns ofproductsfromthecustomereveniftheCompany,inturn,has arighttoreturnthe
productstotheoriginalsupplieriftheproductsaredefective.Underthesesalesterms,theCompanyservesastheprincipalwith
thecustomerand,therefore,recognizesthebilledamountofthegrosssaleandthefullcostofsaleoftheproductuponshipment
bythesupplier.
Inaddition,theCompanyhascertaincontractualrelationshipswithitscustomersandsupplierswherebyAvnetassumesan
agencyrelationship inthesalestransaction.Insuchagencyarrangements,theCompanyrecognizesthenetfee associated with
servingasanagentwithinsaleswithnoassociatedcostofsales.
Revenues from maintenance contracts where Avnet is the principal are recognized ratably over the life of the contracts,
generallyrangingfromonetothreeyears.
Revenues are recorded net of discounts, customer rebates and estimated returns. Provisions are made for discounts and
customer rebates, which are primarily timing or volume specific, and are estimated based on historical trends and anticipated
customer buying patterns. Provisions for returns and other sales adjustments are estimated based on historical sales returns
experience,creditmemoexperienceandotherknownfactors.
Vendor allowances and consideration  —Consideration received from suppliers for price protection, product rebates,
marketing/promotional activities, or any other programs are recorded when earned under the terms and conditions of such
supplierprogramsasadjustmentstoproductcostsorselling,generalandadministrativeexpensesdependinguponthenatureand
contractualrequirementsrelated to the consideration received. Some of these supplier programsrequires management tomake
estimatesandmayextendoveroneormorereportingperiods.
Comprehensiveincome—Comprehensiveincome(loss)representsnetincomefortheyearadjustedforcertainchangesin
shareholders’ equity. Accumulated comprehensive income items impacting comprehensive income (loss) includes foreign
currencytranslationandtheimpactoftheCompany’spensionliabilityadjustments,netoftax(seeNote4).
Stock-based compensation — The Company measures stock-based payments at fair value and generally recognizes the
associatedoperatingexpenseintheconsolidatedstatementofoperationsovertherequisiteserviceperiod(seeNote12).Astock-
basedpaymentisconsideredvestedforaccountingexpenseattributionpurposeswhentheemployee’s
52
