IFX » Topics » Revenue

This excerpt taken from the IFX 20-F filed Dec 8, 2009.
Revenue
 
The Company generates revenues from the sale of its semiconductor products and systems solutions. The Company’s semiconductor products include a wide array of chips and components used in electronic applications ranging from wireless communication systems, to chip cards, automotive electronics, and industrial applications. In addition, the Company generates a small portion of its revenues from granting licenses for its intellectual property to third parties. Infineon generates an insignificant amount of its revenue from development or product enhancement arrangements and services.
 
Revenues from products sold are recognized in accordance with IAS 18, “Revenue”, when the conditions for revenue recognition are met, which in particular require that persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the risks and rewards of ownership have been transferred to the customer, the amount of revenue can be measured reliably, and collection of the related receivable is reasonably assured.
 
The Company recognizes revenue on sales to distributors using the “sell in” method (i.e. when product is sold to the distributor) rather than the “sell through” method (i.e. when the product is sold by the distributor to the end user). In accordance with established business practice in the semiconductor industry, distributors can apply for price protection. Under price protection, a credit may be provided to the distributor if the Company lowers its price on products held in the distributor’s inventory. In addition, a distributor can apply for a ship & debit credit when the distributor wishes to reduce the sales price to an end customer on a specific sales transaction. The authorization of the distributor’s refund remains fully within the control of the Company. The Company calculates the provision for price protection in the same period the related revenue is recorded based on historical price trends and sales rebates, analysis of credit memo data, specific information contained in the price protection agreement, and other factors known at the time. The historical price trend is determined based on the difference between the invoiced price and the


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Table of Contents

 
Infineon Technologies AG and Subsidiaries
Notes to the Consolidated Financial Statements
 
standard list price to the distributor. The outstanding inventory period, the visibility into the standard inventory pricing for standard products, and the long distributor pricing history enables the Company to reliably estimate price protection provisions. The Company monitors potential price adjustments on an ongoing basis.
 
In addition, distributors can, in certain cases, also apply for stock rotation and scrap allowances. Allowances for stock rotation returns are accrued based on expected stock rotation as per the contractual agreement. Distributor scrap allowances are accrued based on the contractual agreement and, upon authorization of the claim, reimbursed up to a certain maximum of the average inventory value. Historically, actual returns under such return provisions have been insignificant. The Company monitors such product returns on an ongoing basis.
 
In some cases, rebate programs are offered to specific customers or distributors whereby the customer or distributor may apply for a rebate upon achievement of a defined sales volume. Distributors are also partially compensated for commonly defined cooperative advertising on a case-by-case basis.
 
Other returns are permitted only for quality-related reasons in the normal course of business within the applicable warranty period. These warranties represent guarantees made by Infineon that the products sold will perform as specified. The Company records a provision for warranty costs as a charge to cost of sales, based on historical experience and any other warranty costs that are known.
 
This excerpt taken from the IFX 6-K filed Jul 16, 2009.
Revenue
 
Revenues from products sold are recognized in accordance with IAS 18, “Revenue”, when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the risks and rewards of ownership have been transferred to the customer, the amount of revenue can be measured reliably, and collection of the related receivable is reasonably assured. The Company records reductions to revenue for estimated product returns and allowances for discounts, volume rebates and price protection, based on historical experience, at the time the related revenue is recognized. In general, returns are permitted only for quality-related reasons within the applicable warranty period. The Company records a provision for warranty costs as a charge to cost of sales, based on historical experience of warranty costs incurred as a percentage of net sales, because the Company’s management believes that this is a reasonable estimate of potential losses to be incurred within the warranty period.
 
In accordance with business practice in the semiconductor industry, distributors can, in certain cases, apply for price protection. Price protection programs allow distributors to apply for a price protection credit on unsold inventory in the event the Company reduces the standard list price of the products included in such inventory. The authorization of the distributor’s refund remains fully within the control of the Company. The Company calculates the provision for price protection in the same period the related revenue is recorded based on historical price trends and sales rebates, analysis of credit memo data, specific information contained in the price protection agreement, and other factors known at the time. The historical price trend represents the difference between the invoiced price and the standard list price to the distributor. The short outstanding inventory period, the visibility into the standard inventory pricing for standard products, and the long distributor pricing history have enabled the Company to reliably estimate price protection provisions at the end of the period.
 
In addition, distributors can, in certain cases, also apply for stock rotation and scrap allowances. Allowances for stock rotation returns are accrued based on expected stock rotation as per the contractual agreement. Distributor scrap allowances are accrued based on the contractual agreement and, upon authorization of the claim, reimbursed up to a certain maximum of the average inventory value. In some cases, rebate programs are offered to specific customers or distributors whereby the customer or distributor may apply for a rebate upon achievement of a defined sales volume. Distributors are also partially compensated for commonly defined cooperative advertising on a case-by-case basis.
 
This excerpt taken from the IFX 6-K filed Dec 30, 2008.
Revenue
 
Revenues from products sold are recognized in accordance with IAS 18, “Revenue”, when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the risks and rewards of ownership have been transferred to the customer, the amount of revenue can be measured reliably, and collection of the related receivable is reasonably assured. The Company records reductions to revenue for estimated product returns and allowances for discounts, volume rebates and price protection, based on historical experience, at the time the related revenue is recognized. In general, returns are permitted only for quality-related reasons within the applicable warranty period. The Company records a provision for warranty costs as a charge to cost of sales, based on historical experience of warranty costs incurred as a percentage of net sales, because the Company’s management believes that this is a reasonable estimate of potential losses to be incurred within the warranty period.
 
In accordance with business practice in the semiconductor industry, distributors can, in certain cases, apply for price protection. Price protection programs allow distributors to apply for a price protection credit on unsold inventory in the event the Company reduces the standard list price of the products included in such inventory. The authorization of the distributor’s refund remains fully within the control of the Company. The Company calculates the provision for price protection in the same period the related revenue is recorded based on historical price trends and sales rebates, analysis of credit memo data, specific information contained in the price protection agreement, and other factors known at the time. The historical price trend represents the difference between the invoiced price and the standard list price to the distributor. The short outstanding inventory period, the visibility into the standard inventory pricing for standard products, and the long distributor pricing history have enabled the Company to reliably estimate price protection provisions at the end of the period.
 
In addition, distributors can, in certain cases, also apply for stock rotation and scrap allowances. Allowances for stock rotation returns are accrued based on expected stock rotation as per the contractual agreement. Distributor scrap allowances are accrued based on the contractual agreement and, upon authorization of the claim, reimbursed up to a certain maximum of the average inventory value. In some cases, rebate programs are offered to specific customers or distributors whereby the customer or distributor may apply for a rebate upon achievement of a defined sales volume. Distributors are also partially compensated for commonly defined cooperative advertising on a case-by-case basis.
 
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