Company: AOSL
Filing Date: 2025-02-06
Form Type: 10-Q
Source: 0001387467-25-000017
Chunk: 62

Company: ALPHA & OMEGA SEMICONDUCTOR Ltd
Filing Date: 2025-02-06
Form: 10-Q
Item: Item 8
Chunk 62
---
 the consolidated financial statements will be affected. On an ongoing basis, the Company evaluates the estimates, judgments and assumptions including those related to stock rotation returns, price adjustments, inventory reserves, income taxes, leases, share-based compensation, recoverability of and useful lives for property, plant and equipment and intangible assets.Revenue recognitionThe Company determines revenue recognition through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, a performance obligation is satisfied.  The Company recognizes product revenue at a point in time when product is shipped to the customer, as determined by the agreed upon shipping terms, net of estimated stock rotation returns and price adjustments that it expects to provide to certain distributors.  The Company presents revenue net of sales taxes and any similar assessments.  Our standard payment terms range from 30 to 60 days.The Company sells its products primarily to distributors, who in turn sell the products globally to various end customers. The Company allows stock rotation returns from certain distributors.  Stock rotation returns are governed by contract and are limited to a specified percentage of the monetary value of products purchased by distributors during a specified period.  The Company records an allowance for stock rotation returns based on historical returns, expected sales volumes and individual distributor agreements.  The Company also provides special pricing to certain distributors, primarily based on volume, to encourage resale of the Company’s products.  Allowance for price adjustments is recorded against accounts receivable and the provision for stock rotation rights is included in accrued liabilities on the consolidated balance sheets. 

7

ALPHA AND OMEGA SEMICONDUCTOR LIMITEDNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The Company’s performance obligations relate to contracts with a duration of less than one year.  The Company elected to apply the practical expedient provided in ASC 606, “Revenue from Contracts with Customers”.  Therefore, the Company is not required to disclose the aggregate amount of transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. The Company recognizes the incremental direct costs of obtaining a contract, which consist of sales commissions, when control over the products they relate to transfers to the customer.  Applying the practical expedient, the Company recognizes commissions as expense when incurred, as the amortization