Logitech 2015 Annual Report Download - page 123

$122.7 million non-cash goodwill impairment charge in the quarter ended March 31, 2015. We believe
the growth in our video conferencing segment depends in part on our ability to increase sales of our new
Cloud offering and smooth transition from our legacy infrastructure business.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP
(Generally Accepted Accounting Principles in the United States of America) requires us to make
judgments, estimates and assumptions that affect reported amounts of assets, liabilities, net sales and
expenses, and the disclosure of contingent assets and liabilities.
We consider an accounting estimate critical if it: (i) requires management to make judgments and
estimates about matters that are inherently uncertain; and (ii) is important to an understanding of our
financial condition and operating results.
We base our estimates on historical experience and on various other assumptions we believe to
be reasonable under the circumstances. Although these estimates are based on management’s best
knowledge of current events and actions that may impact us in the future, actual results could differ from
those estimates. Management has discussed the development, selection and disclosure of these critical
accounting estimates with the Audit Committee of the Board of Directors.
We believe the following accounting estimates are most critical to our business operations and to
an understanding of our financial condition and results of operations, and reflect the more significant
judgments and estimates used in the preparation of our consolidated financial statements.
Accruals for Customer Programs
We record accruals for product returns, cooperative marketing arrangements, customer incentive
programs and pricing programs. An allowance against accounts receivable is recorded for accruals and
program activity related to our direct customers and indirect customers who receive payments for program
activity through our direct customers. A liability is recorded for accruals and program activity related to our
indirect customers who receive payments directly and do not have a right of offset against a receivable
balance. The estimated cost of these programs is usually recorded as a reduction of revenue. If we
receive a separately identifiable benefit from the customer and can reasonably estimate the fair value
of that benefit, such cost is reflected in cost of sales or in operating expenses. Significant management
judgment and estimates must be used to determine the cost of these programs in any accounting period.
Returns. We grant limited rights to return products. Return rights vary by customer, and range from
just the right to return defective product to stock rotation rights limited to a percentage of sales approved
by management. Estimates of expected future product returns are recognized at the time of sale based
on analyses of historical return trends by customer and by product, inventories owned by and located
at distributors and retailers, current customer demand, current operating conditions, and other relevant
customer and product information. Upon recognition, we reduce sales and cost of sales for the estimated
return. Return trends are influenced by product life cycle status, new product introductions, market
acceptance of products, sales levels, product sell-through, the type of customer, seasonality, product
quality issues, competitive pressures, operational policies and procedures, and other factors. Return
rates can fluctuate over time, but are sufficiently predictable to allow us to estimate expected future
product returns.
Cooperative Marketing Arrangements. We enter into customer marketing programs with many of our
distribution and retail customers, and with certain indirect partners, allowing customers to receive a credit
equal to a set percentage of their purchases of our products, or a fixed dollar credit for various marketing
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Annual Report Fiscal Year 2015