VOLC » Topics » Use of Estimates

These excerpts taken from the VOLC 10-K filed Mar 10, 2009.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Estimates are used for, but not limited to, the allowance for doubtful accounts, inventory reserves, depreciation and amortization, intangible assets, sales returns, business combinations, warranty costs, certain accruals, long-lived asset impairment calculations and contingencies. Actual results could differ materially from the estimates and assumptions we use in the preparation of our consolidated financial statements.

Use of Estimates

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.
Estimates are used for, but not limited to, the allowance for doubtful accounts, inventory reserves, depreciation and amortization, intangible assets, sales returns, business combinations, warranty costs, certain accruals, long-lived asset
impairment calculations and contingencies. Actual results could differ materially from the estimates and assumptions we use in the preparation of our consolidated financial statements.

FACE="Times New Roman" SIZE="2">Foreign Currency Translation

The Euro is the functional currency of Volcano Europe, as it is
the primary currency within the economic environment in which it operates. Assets and liabilities of Volcano Europe’s operations are translated into U.S. dollars at period-end exchange rates, and revenues and expenses are translated into U.S.
dollars at average exchange rates in effect during each reporting period. Adjustments resulting from the translation are reported in other comprehensive loss.

 


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Exchange rate fluctuations resulting from the translation of the inter-company balances between Volcano
Corporation U.S. and Volcano Europe and other non-U.S. dollar denominated liabilities into U.S. dollars are recorded as foreign currency transaction gains or losses and are included in exchange rate gain in the consolidated statement of operations.
In April 2008, $22.6 million of intercompany receivable owed to Volcano Corporation from Volcano Europe was converted into equity, resulting in a decrease in the amount of Euro-based receivables being marked-to-market, thereby reducing the impact of
the exchange rate fluctuation during the year.

The U.S. dollar is the functional currency of Volcano Japan, as it is the primary currency
within the economic environment in which it operates. Yen-based assets and liabilities of our Japanese operations are remeasured into U.S. dollars at period-end exchange rates, and Yen-based expenses are converted into U.S. dollars at average
exchange rates in effect during each reporting period. Adjustments resulting from the translation are recorded as foreign currency transaction gains or losses and are included in exchange rate gain in the consolidated statement of operations. We
will continue to assess the appropriateness of the functional currency of Volcano Japan.

EXCERPTS ON THIS PAGE:

10-K (2 sections)
Mar 10, 2009
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