UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934

Release No. 77644 / April 19, 2016

ACCOUNTING AND AUDITING ENFORCEMENT

Release No. 3765 / April 19, 2016

ADMINISTRATIVE PROCEEDING

File No. 3-17212

In the Matter of

LOGITECH 

INTERNATIONAL, S.A.,

MICHAEL DOKTORCZYK, 

and SHERRALYN BOLLES,

CPA,

Respondents.

ORDER INSTITUTING CEASE-AND-DESIST 

PROCEEDINGS PURSUANT TO SECTION

21C OF THE SECURITIES EXCHANGE ACT 

OF 1934, MAKING FINDINGS, AND 

IMPOSING CEASE-AND-DESIST ORDERS 

AND PENALTIES

I.

The Securities and Exchange Commission (“Commission”) deems it appropriate that ceaseand-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities 

Exchange Act of 1934 (“Exchange Act”) against Logitech International, S.A. (“LOGI” or “the 

Company”), Michael Doktorczyk (“Doktorcyzk”), and Sherralyn Bolles, CPA (“Bolles”)

(collectively, “Respondents”).

II.

In anticipation of the institution of these proceedings, Respondents have submitted Offers

of Settlement (the “Offers”) which the Commission has determined to accept. Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the findings 

herein, except as to the Commission’s jurisdiction over them and the subject matter of these 

proceedings, which are admitted, and except as provided herein in Section V, Respondents consent

to the entry of this Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the 

Securities Exchange Act of 1934, Making Findings, and Imposing Cease-and-Desist Orders and 

Penalties (“Order”), as set forth below. 
2

III.

On the basis of this Order and Respondents’ Offers, the Commission finds1that:

Summary

These proceedings arise out of, and this Order covers, recurring instances of improper 

accounting in three separate areas at Logitech International, S.A. during a five-year period. The first 

concerns LOGI’s actions and omissions in fraudulently accounting for the write-down of a failed 

product in its fiscal year22011 (“FY11”) financial statements. The second relates to actions and 

omissions by LOGI, Michael Doktorczyk, and Sherralyn Bolles concerning the accounting for the 

Company’s warranty liabilities in the FY12 and FY13 financial statements, and concerning the 

failure to correct, in the FY13 financial statements, a known error in not amortizing intangibles from 

a prior acquisition. The third concerns books and records, reporting, and control violations by 

LOGI pertaining to the Company’s revenue recognition in its Americas region in FY09. 

Doktorczyk and Bolles, whose employment at LOGI began in July 2011 and July 2012, 

respectively, were not involved in the first and third areas.

Respondents

Logitech International S.A. is incorporated in Switzerland and has substantial operations in 

the United States. LOGI is primarily involved in manufacturing and selling peripherals for 

computers and electronic devices. Its shares are listed on both the Nasdaq Global Select Market, 

under the trading symbol LOGI, and the SIX Swiss Exchange, under the trading symbol LOGN. 

The company maintains an executive office and its Americas region headquarters in Newark, 

California. LOGI’s common stock is registered with the Commission pursuant to Exchange Act 

Section 12(b).

Michael Doktorczyk, age 50, resides in Menlo Park, California. From July 2011 (when he 

started at the Company) through August 2014, he was the Company’s Vice President of Finance 

and Corporate Controller. In May 2013, when LOGI filed its Form 10-K for FY13, Doktorczyk 

was also the Company’s Principal Financial Officer and Principal Accounting Officer. 

Doktorczyk’s employment at LOGI ended in August 2014.

Sherralyn Bolles, age 50, resides in Castro Valley, California. From July 2012 (when she 

started at the Company) through August 2014, she was the Director of Accounting and Financial 

Reporting for the Company. Bolles’s employment at LOGI ended in August 2014.

 

1

 The findings herein are made pursuant to Respondents’ Offers of Settlement and are not binding on any other 

person or entity in this or any other proceeding.

2 The Company’s fiscal year is April 1 to March 31. 
3

Accounting for Revue Product/Components

(Concerning the Company)

1. In October 2010 (LOGI’s fiscal Q311), LOGI launched a product called “Revue,” a 

set-top device that connected to televisions, allowing internet usage and video 

streaming. Prior to launching Revue, LOGI had retained a contract manufacturer 

(“CM”) in Asia to produce hundreds of thousands of units in anticipation of 

demand during the year-end holidays. LOGI had also authorized the CM to 

purchase millions of dollars of components to meet expected demand.

2. From the outset, Revue sales were significantly below LOGI’s internal forecasts. 

By late November 2010, sales and finance personnel, including senior executives, 

were addressing whether the market price of $299 should be cut. LOGI’s CFO at 

the time (“Former CFO”), and its acting controller (“Former Acting Controller”), 

were aware that LOGI might have to evaluate taking a “lower of cost or market” 

(“LCM”) charge if the value of Revue inventory was impaired. 

3. Under Generally Accepted Accounting Principles (“GAAP”)

3

, the Company was 

required to value its inventory at the lower of the inventory’s cost or market value. 

Specifically, if the market value of a company’s inventory (generally calculated for 

finished goods as the estimated selling prices in the ordinary course of business, 

less reasonably predictable costs of completion, disposal, and transportation) is less 

than its cost, then the company must write-down the inventory value in its financial 

statements. 

4. On or around December 7, 2010, because of high inventory levels and weak sales, 

LOGI directed CM to stop manufacturing Revue, including halting all work-inprogress. LOGI also instructed CM not to ship over 26,000 finished Revue units. 

Further, because CM, at LOGI’s direction, had purchased parts for future 

manufacturing, LOGI was liable for approximately $11 million of excess 

components.

5. At the end of Q311 (December 31, 2010), Revue sales were only 40% of LOGI’s

forecasts for that product. As part of its Q311 financial closing process, LOGI 

performed an LCM analysis of the Revue finished goods inventory and concluded 

that no adjustment, or write-down, was required. 

6. On or around January 5, 2011, LOGI’s Senior Vice-President of Operations (SVPOperations) informed several executives that he intended to “dispose of the 

components” awaiting assembly by CM in light of Revue’s “current trajectory.” 

Shortly thereafter, the SVP-Operations instructed the VP of Global 

Sourcing/Supplier Management (VP-Global Sourcing) to “sell all of the 

components we could.” 

 

3

FASB Accounting Standards Codification 330-10-35 Inventory – Subsequent Measurement.
4

7. Later in January 2011, LOGI management informed the Board of Directors about 

the poor sales of Revue and about management’s future plans for the product, 

including a plan to lower the retail price of Revue to $249 in Q112, and to $199 in 

Q312. Management did not inform its independent auditor of this pricing plan

strategy.

8. On January 27, 2011, LOGI issued its Q311 earnings release, reporting strong 

results, increasing its guidance for annual revenue for fiscal year-end March 31, 

2011, and affirming its guidance for annual operating income in a range of $170M-

$180M.

9. During LOGI’s fiscal Q411, Revue sales continued to be far below projections. For 

all of Q411, despite regular discounting and promotions, Revue sales were 30% of 

internal product forecasts. By quarter-end, retailers were selling fewer than 1,000 

Revue units per week.

10. At the end of Q411, LOGI had over 163,000 units of Revue finished inventory in 

its US distribution centers, with another 52,000 finished and work-in-progress units 

in Asia. Based on the sales rate for Q411, LOGI had well over a year’s supply of 

Revue. At the quarter-end sales rate to retailers, LOGI had over three years of 

inventory.

11. In mid-March 2011, an accountant in LOGI’s Regional Finance area asked LOGI’s 

VP-Global Sourcing about financial risk for the Revue product and the number of 

units that could be built from on-hand components. The VP-Global Sourcing 

informed her that there was no plan to use the components and that Global Sourcing 

was attempting to sell whatever could be sold. He also noted: “If we need to scrap 

[work-in-progress] and components, we should assume a recoverable value of 

zero.”

12. On or around March 23, 2011, a LOGI Finance employee sent the Former Acting 

Controller a summary of potential excess and obsolete inventory for contract 

manufacturers in preparation for a meeting the next day to discuss required 

accounting adjustments for the year-end financials. The summary highlighted a 

total potential excess inventory of $19.4M for Revue units and components that 

“should be reserved.”

13. On March 31, 2011, LOGI announced that, for reasons unrelated to Revue, it would 

miss the guidance it had provided to the market two months earlier. LOGI lowered 

the previous guidance for operating income by $30M (to a range of $140M-

$150M). Internally, the CEO characterized the guidance miss as a “disaster” and 

informed his executive team, including the Former CFO, that management’s 

credibility with the market was damaged.
5

14. For its FY11 year-end financial close process, LOGI initially prepared an LCM 

analysis indicating that no LCM adjustment was required for Revue finished goods 

inventory. The company’s independent auditor arranged separate meetings with 

LOGI’s Former CFO and Former Acting Controller to discuss the importance of 

the assumptions in the LCM analysis. In the meetings, the independent auditor

stressed the need to consider future pricing assumptions and strategies. Within 

days, LOGI revised the LCM analysis and, based on a planned price cut to $249 in 

Q112, recorded a $2.2M adjustment. However, in the revised analysis, LOGI did 

not account for the planned Q312 price cut to $199, nor did LOGI consider the 

excess component inventory.

15. After receiving the revised LCM with the $2.2 million adjustment, the independent

auditor noted the roughly $11 million of excess component inventory and informed 

the Former Acting Controller and Regional Finance that LOGI was also required to 

evaluate and, if necessary, record an adjustment for the component inventory.

16. LOGI’s Regional Finance accountant resisted adjusting for the component

inventory. When the independent auditor persisted, Regional Finance again 

emailed the VP-Global Sourcing, notifying him there was “heated discussion” with 

the independent auditor about Revue, and asking him to determine the number of 

Revue units that could be built from the component inventory.

17. The VP-Global Sourcing, who was responsible for managing the component 

inventory liability, informed Regional Finance and the Former Acting Controller

that production had been stopped for months and that he did not “see a chance that 

we are ever going to build [the components] into units.” He wrote that a build-out 

of components was a “far fetched scenario that has never been formulated.” He 

also explained that, at the direction of the SVP-Operations, “we have been working 

since January to resell component liabilities” with only modest success: “the easiest 

stuff to resell . . . is moving at 40-50 cts on the dollar maximum. For the rest of 

components, we should assume 25cts on the dollar of recovery, the rest will be a 

hard loss.”

18. The Former Acting Controller forwarded the information to the Former CFO, who 

asked about the potential exposure if the information was correct. In her reply to 

the Former CFO, the Former Acting Controller suggested that, by assuming the 

excess components would be built into finished goods, LOGI could reduce the 

amount it would have to write-down. There was no basis for any such assumption.

19. The Former CFO replied: “Yes, we need to understand with precision what we are 

looking at and what decisions we need to make or clarify. We are still committed 

to making the right decisions and staying within our lowered range for Q4—we 

need to achieve them both.”
6

20. On the next day (April 18, 2011), the Former Acting Controller received a detailed 

list of the excess components. Less than an hour later, she sent a spreadsheet 

containing an LCM component analysis to the independent auditor, calculating an 

adjustment of $1.1M, based on a hypothetical build-out of 79,000 additional 

finished units of Revue. The Former Acting Controller ignored the fact 

(communicated to her two days earlier) that LOGI had been actively attempting to 

sell all of the components, with only limited success and below cost. Instead, she 

based the Company’s accounting on a “far fetched scenario.” 

21. On or around April 18, 2011, after forwarding the component LCM analysis

spreadsheet to the independent auditor, the Former Acting Controller met with 

members of the independent audit team. At that meeting, the Former Acting 

Controller discussed LOGI’s plans to use the $11 million of excess components to 

build 79,000 finished Revue units. She also represented that LOGI could use 

excess components (beyond what was needed to make 79,000 Revue units) to 

manufacture even more Revue units. The Former Acting Controller’s 

representations were false.

22. During the week of April 18, 2011, the Former Acting Controller and Former CFO

met with senior members of the independent audit team. In those meetings the 

Former Acting Controller and Former CFO confirmed the assumptions used in the 

LCM analyses, and represented that LOGI was committed to the Revue product for 

the long-term and was going to build at least 79,000 additional units using excess 

components. These representations were false. 

23. At the time the representations were made, the Former Acting Controller and 

Former CFO knew, or were reckless in not knowing, that LOGI had no plan to 

produce additional units of Revue. They knew, or were reckless in not knowing, 

that CM had not shipped any Revue units since late November 2010, and had 

stopped production in early December 2010. In fact, they knew, or were reckless in 

not knowing, that LOGI had no timetable for re-starting production or even for 

completing the work-in-progress units and, for months, had been attempting to sell 

excess component inventory at substantial discounts. 

24. On or around May 27, 2011, the Former Acting Controller and Former CFO signed 

a management representation letter to the independent audit firm. The letter 

contained material misrepresentations concerning the valuation of inventory and the 

LCM analysis for Revue inventory. Specifically, with respect to the Revue LCM

analysis, the letter represented that “we considered future pricing 

adjustments/discounts which are probable of occurring.” This representation was

false because the LCM analysis did not consider the planned price drop to $199 in 

Q312 or other discounting or promotions that would likely be required to sell the 

excess finished goods inventory.
7

25. The Former Acting Controller and Former CFO knew, or were reckless in not 

knowing, that the representations in the management representation letter 

concerning inventory valuation and the LCM analysis were false. Prior to including 

the language on LCM and inventory valuation in the representation letter, the 

independent audit team had made both the Former Acting Controller and Former 

CFO aware of the importance of considering future pricing in the LCM analysis. 

As LOGI acknowledged in its November 2014 restatement, the Company had not 

considered future pricing adjustments/discounts that were probable of occurring. 

The LCM analysis provided to the independent audit firm, and which the Former 

Acting Controller and Former CFO discussed with the auditor, did not address—or 

account for—LOGI’s plan to lower the price to $199 in or before Q312. 

26. On May 27, 2011, LOGI filed its Form 10-K with the Commission. The Former 

CFO signed the Form 10-K as the Company’s CFO and Principal Accounting 

Officer. LOGI reported operating income of $142.7M, which was within the 

lowered range of $140M-$150M that LOGI had communicated to investors on 

March 31, 2011. 

27. On November 14, 2014, LOGI restated its financial results for FY11 and FY12 

because of errors in the timing of the Revue-related inventory write-downs. At the 

time it initially filed its FY11 financial statements, LOGI overstated its operating 

income by $30.7M, i.e., over 27%. If LOGI had properly accounted for Revuerelated inventory in May 2011, it would have reported operating income of 

approximately $112M, far below the lowered guidance of $140M-$150M.

Warranty Accrual Accounting

(Concerning the Company, Doktorczyk, and Bolles)

28. Historically, LOGI divided its operations into three geographical regions: Americas 

(AMR); Europe, Middle East and Africa (EMEA); and Asia-Pacific/Japan (APJ). 

LOGI offered warranties on its products sold throughout the world. Depending 

upon the particular country and type of product, the warranties ranged from one to 

five years.4 In FY09, after its independent auditor raised the need to accrue for its 

warranty liability, LOGI began recording a liability in its books and records. 

29. In the latter part of FY09, accountants within LOGI, including the same Former 

Acting Controller, developed a warranty accrual model for the AMR region based 

on the assumption that, if a product failed, it would fail quickly and be returned 

within one quarter. The Company did not have a basis for this assumption, nor did it

have sufficient data to evaluate such an assumption. The warranty model also did 

 

4 The need to account for contingent liabilities, including liability for future product warranty claims, was addressed 

in SFAS 5, Accounting for Contingencies. Pertaining to warranties in particular, SFAS 5 was codified as ASC 460-

10-25, Product Warranties.
8

not consider when the warranty liability began (i.e., when products were purchased 

by end-users) or when the liability ended (i.e., one, two, or five years after purchase 

of a product by the end-user). This model was shared with the independent auditors.

30. From FY08 through FY11, the deficiencies of LOGI’s AMR model—and the need 

for a more robust method—were known within LOGI’s finance and accounting 

groups. During FY10, LOGI’s then-controller noted that the Company’s warranty 

model was “not good” because it was not based on the total number of products 

under warranty in the hands of consumers. Despite this recognition, LOGI 

continued to use the model to record the warranty liability. 

31. During LOGI’s FY12, a senior accountant was assigned to provide operational input 

on LOGI’s warranty in the AMR region. The senior accountant reviewed the model 

and could not understand the reason or basis for various discretionary inputs or the 

underlying assumptions. She also discovered that the model did not take into 

account the length of the product warranty term. Specifically, the senior accountant 

determined that, if LOGI were to change its warranty term (e.g., increase the length 

of the warranty from one-year to three-years), the model’s calculated exposure (i.e., 

the required accrual) would not change. In other words, the model calculated the 

same warranty accrual regardless of whether products carried a three-month 

warranty or a 10-year warranty.

32. The senior accountant inquired but could not get an explanation or basis for the 

inputs or why changing the warranty term would not impact the calculated accrual. 

The senior accountant also realized that the model did not use “sell-through data” 

(data on product sales to consumers). Although she lacked expertise in warranty 

accounting, she concluded that the Company’s warranty accrual model did not 

comply with GAAP.

33. In Q312, the senior accountant developed a new, more robust “waterfall” model

despite having only limited historical sales and return data available to her. Using 

the new model, she estimated that the Company was under-reserved by several 

million dollars. She reported her findings to her supervisor, who arranged a meeting 

with Doktorczyk (the controller). 

34. Since at least 2004, LOGI’s finance and accounting groups and senior management 

used a quarterly “exposure list” to keep track of significant recorded entries, 

potential exposures or charges, reclassifications, and other items. LOGI’s finance 

and accounting groups did not share the exposure list with its independent auditor. 

In Q312, the warranty accrual was added to the list as a “potential exposure,” with 

the amount of exposure “TBD” [to-be-decided]. The warranty accrual remained on 

the list as a “potential exposure” for six more quarters.
9

35. On or around December 21, 2011 (the end of Q312), the senior accountant presented 

her conclusions to Doktorczyk, the Former Acting Controller, and others. In the 

presentation, the senior accountant set forth the deficiencies with the existing model 

and indicated a likely under-accrual of $3.4M. Doktorczyk did not ensure that 

deficiencies in the model were corrected.

36. Five months later, in May 2012, as part of the Company’s internal accounting 

controls, the senior accountant was asked to confirm5the accuracy of certain 

statements, one of which included language about the Company’s warranty

provisions. Because she believed the warranty accrual did not comply with GAAP, 

the senior accountant refused to confirm or certify the statement. The senior 

accountant’s refusal to confirm or certify the statement about the warranty 

provisions was not raised with, and accordingly was not acted upon by, Doktorczyk. 

37. Bolles started at LOGI in Q213. In Q313, an accountant in Financial Planning and 

Analysis (FP&A) became responsible for calculating the warranty accrual. She 

noted the same problems, and came to the same conclusion, as the senior accountant. 

When the FP&A accountant studied the existing AMR warranty model, she could 

not understand the basis for the inputs and assumptions, and attempted, 

unsuccessfully, to get an explanation of the AMR model’s inputs and rationale.

38. In Q313, the FP&A accountant also discovered that the warranty accrual models for 

the Company’s other regions (EMEA and APJ) were different than the AMR model. 

In addition, she determined that LOGI had not updated its warranty accrual 

calculation in its EMEA region for the two prior quarters because the person who 

had previously done the calculation had been laid off and no one could find the 

model. Bolles was informed about the lack of any support for the EMEA 

calculation.

39. By the end of Q313, the FP&A accountant had concluded that LOGI’s warranty 

accrual, as computed with the existing model, was not appropriate under GAAP. 

She informed Doktorczyk and Bolles about the significant problems with the 

warranty accrual calculation, and asked for technical accounting assistance.

40. To assist the FP&A accountant, Bolles assigned the senior accountant who a year 

earlier had concluded that the existing model did not calculate a warranty accrual 

that was GAAP-compliant. At the end of Q313, a meeting was scheduled with the 

independent auditor to discuss the warranty accrual methodology. Shortly before the 

meeting, Bolles postponed it. The meeting never occurred. According to the FP&A 

accountant, the meeting was cancelled because the corporate accounting group did 

“not want to rock the boat . . . at this time with a revised warranty methodology.” 

 

5 This was a sub-certification process that LOGI had implemented.
10

41. In mid-Q413, the supervisor of the FP&A accountant arranged a meeting with 

LOGI’s Former CFO. One purpose of the meeting was to address the concerns with 

the warranty model, the range of additional exposure reflected by a modified 

methodology, and to “share with [LOGI’s Former CFO] our understanding of 

whether the issue can be contained to FY13 or not.”

42. On or about February 14, 2013, LOGI’s top finance and accounting officers—

LOGI’s Former CFO, Doktorczyk, Bolles, and the VP of FP&A, as well as the 

senior accountant and FP&A accountant, attended a meeting at which the senior 

accountant presented her findings regarding the warranty model issues and concerns, 

much like the presentation she had made 14 months earlier. The senior accountant 

told LOGI’s Former CFO that the existing warranty accrual model was not GAAPcompliant. 

43. The February 2013 presentation was explicit about the deficiencies in the current 

model and the estimated amount of additional exposure: $4.2M. The presentation 

also set forth two options for transitioning to a new model: a one-time switch in 

methodology or a “gradual change to existing approach.” The first option would 

result in an immediate charge or “catch up adjustment” to LOGI’s financial results. 

The second option would “change the current model gradually to increase reserves 

until [the] catch up entry is not material before switching the model.” The second 

option was not GAAP-compliant.

44. At the direction of LOGI’s Former CFO, the Company implemented the second 

option—the plan to gradually increase the reserve. Specifically, the Company 

planned for, and added, $1M to its warranty accrual for Q413. The Company added 

the $1M in Q413 by manipulating certain formulas in its existing warranty accrual 

model. The Company also planned to add $1M per quarter for the first three 

quarters of FY14. 

45. Despite the warranty accrual remaining as a “potential exposure” item on the 

exposure list for six quarters, neither LOGI’s Former CFO nor any LOGI accountant 

informed the Company’s independent auditor about the under-accrual or the 

problems with the existing model for over a year and a half, during which time 

LOGI filed four Forms 10-Q and two Forms 10-K. 

46. Toward the end of Q413, the senior accountant also discovered that LOGI

apparently had not amortized certain intangibles from a FY10 acquisition. The 

senior accountant informed Bolles of the potential error in March 2013, over two 

months before the filing of the FY13 Form 10-K. The potential amortization error, 

which was estimated at approximately $1.87M, was also added as a “potential 

exposure” item on the finance and accounting groups’ exposure list. 
11

47. No later than April 2013, Bolles was aware that her staff, which included the senior 

accountant, had researched the intangibles issue and concluded that the Company 

had failed to amortize certain intangibles. Bolles did not cause the error to be 

corrected in FY13 or inform the independent auditor about it before the filing of the

Form 10-K.

48. On May 30, 2013, LOGI filed its Form 10-K for FY13, which contained material 

misstatements and omissions about the Company’s product warranty accruals. In 

particular, LOGI misstated the amount of its product warranty liability by over

$17.2M.

49. LOGI’s Former CFO resigned from LOGI in April 2013. Doktorczyk was asked to 

become the Company’s principal financial officer and principal accounting officer, 

and he signed the Form 10-K in that capacity approximately two weeks later. At the 

time he signed the Form 10-K, Doktorczyk knew, or should have known, about two 

accounting errors/exposures that the Company had failed to correct in its books and 

records and about which the Company had failed to inform its independent auditor. 

50. On May 30, 2013, Doktorczyk and Bolles signed a letter to the Company’s audit

firm representing that “there were no material transactions, agreements or accounts 

that have not been properly recorded in the accounting records underlying the 

consolidated financial statements.” The materiality threshold in the letter was 

$500K. At the time they signed the letter, Doktorczyk and Bolles knew, or should 

have known, about two issues—additional warranty accrual exposure (estimated to 

be $4.2M at the time) and failure to amortize intangibles (approx. $1.87M) —that 

exceeded the letter’s materiality threshold and had not been properly recorded in the 

Company’s books and records.

51. On May 30, 2013, Doktorczyk certified that the Form 10-K did not contain any 

untrue statement of a material fact or omit to state a material fact necessary to make 

the statements made, in light of the circumstances under which such statements were 

made, not misleading with respect to the period covered by the Form 10-K. 

Doktorczyk also certified that the financial statements, and other financial 

information in the Form 10-K, fairly presented in all material respects the financial 

condition, results of operations and cash flows of LOGI for the period reported. At 

the time he signed the certification, Doktorczyk knew, or should have known, of the 

errors/exposures concerning the warranty accrual and failure to amortize intangibles, 

and the effect of those errors/exposures on the financial statements and results of 

operations. 

52. Prior to the filing of the Company’s Form 10-K in May 2013, Bolles knew, or 

should have known, that LOGI’s internal accounting controls with respect to its 

warranty accrual were insufficient. Bolles was not only aware of deficiencies with 

the AMR warranty model, but also knew, or should have known, that LOGI had 
12

inadequate accounting controls over its warranty reserve in the EMEA region. No 

later than January 2013, she had been informed that LOGI had not updated its 

warranty accrual calculation for two consecutive quarters in the EMEA region and, 

thus, she knew, or should have known, the Company did not have an adequate basis 

for the reserves it had recorded in those quarters.

53. The misstatements and omissions with respect to the warranty accrual were 

material. At the end of FY12, LOGI reserved $5.2M for its warranty obligations 

and reported net income of $71.5M. Using an appropriate methodology (i.e., the 

model that LOGI subsequently proposed and adopted), the Company should have 

reserved $25.5M -- an under-accrual of over $21M. Similarly, in FY13, LOGI’s 

accrual was over $17M lower than the GAAP-compliant model required. 

54. On August 7, 2013, LOGI filed an amended Form 10-K for FY13, disclosing and 

correcting the warranty accrual and amortization expense errors, revising its 

financial statements for FY09 through FY13, and correcting its reporting on internal 

control. 

Revenue Recognition in AMR

(Concerning the Company)

55. From late FY08 through FY09, LOGI improperly recognized revenue for sales to 

its largest wholesale distributor (Distributor) in the AMR region.

56. Historically, in its AMR region, most of LOGI’s sales were to wholesale 

distributors and large retailers. For most sales, including those to Distributor, LOGI 

recognized revenue at the time it shipped products (net of reserves for estimated 

returns, incentives, price protection, and promotional programs). This method of 

revenue recognition is frequently called “sell-in.”

57. Under GAAP6, to recognize revenue based on “sell-in,” LOGI had to meet certain 

criteria, including: LOGI’s price to Distributor had to be substantially fixed or 

determinable at the time of sale, LOGI had to transfer the risks and rewards of 

product ownership (principally, risk of loss) to Distributor, LOGI could not have 

any significant obligation to bring about the resale of the product, and LOGI had to 

be reasonably assured that it could collect payment from the seller.

58. If LOGI could not meet the criteria for “sell-in” revenue recognition, then GAAP 

required the Company to recognize revenue only when it had met all the required 

criteria in GAAP, which was generally when the wholesale distributor (or retailer) 

sold the product to the next reseller (or end user) in the distribution chain.

 

6

Statement of Financial Accounting Standards No. 48 (“SFAS 48”), Revenue Recognition When Right of Return 

Exists, which specifies the criteria a company must meet to recognize revenue at time of sale. This was subsequently 

codified into the Accounting Standards Codification (“ASC”) as ASC 605-15-25 for FY10 and later.
13

59. By the end of FY08, and through FY09, the facts and circumstances of LOGI’s 

relationship with Distributor required LOGI to recognize revenue based upon “sellthrough.” Nevertheless, throughout FY09, the Company continued to recognize 

revenue from Distributor based upon “sell-in.” 

Logitech’s Course of Dealing with Distributor

60. From at least FY07 though FY09, LOGI consistently made large end-of-quarter 

sales to Distributor in a “hockey stick” pattern: modest sales in the first two months, 

with a sharp increase in sales in the quarter’s final weeks. 

61. In order to encourage Distributor to purchase excess product, LOGI provided 

incentives to reach quarterly purchase thresholds, provided discounts for bulk 

container sales, and gave discounts for large, lump-sum payments of overdue 

invoices at quarter-end.

62. To meet its sales numbers, LOGI sold excess quantities of certain products to 

Distributor with the understanding that LOGI would assist Distributor in selling the 

products or would allow Distributor to return the products outside of the return 

period or in excess of the contractual return rights. When Distributor returned 

products, LOGI credited the full invoice price and allowed Distributor to keep the 

incentives and discounts.

63. Because of LOGI’s selling significant amounts of lower-demand goods, Distributor 

had excess inventory of LOGI product and, as a result, withheld payment until 

LOGI provided a plan for reducing Distributor’s inventory. Although Distributor 

had title to the inventory, Distributor considered the inventory to be “owned” only 

if it had paid LOGI for that inventory.

64. To facilitate payment of past-due invoices, LOGI negotiated discounts based, in 

part, on Distributor’s amount of “owned” inventory. During FY09, LOGI gave 

Distributor nearly $3M in such discounts. Although LOGI had established a 

pattern of offering and negotiating these end-of-quarter payment discounts going 

back to FY07, LOGI did not accrue for them at the time of sale/shipment.

65. Distributor viewed the discounts as “owned” inventory discounts that were intended 

to compensate Distributor for its carrying costs of excess inventory. LOGI’s 

practice of using discounts to obtain payment of past-due invoices and negotiating 

discounts based, in part, on “owned” inventory levels was inconsistent with the 

GAAP requirement that the price at the time of sale be fixed or determinable.
14

LOGI’s Attempts to Alleviate Excess Inventory Levels at Distributor

66. Given the facts and circumstances of its business with Distributor, LOGI should 

have recognized revenue using the “sell-through” model no later than Q408. 

Instead, in FY09, LOGI attempted to alleviate the large build-up of inventory by 

finding buyers for Distributor’s excess inventory, arranging “sideways” 

transactions, and allowing Distributor to return excess amounts of product. In 

effect, LOGI treated Distributor as an additional warehouse for inventory. 

67. Throughout FY09, LOGI assisted Distributor in finding buyers for the excess 

inventory that Distributor had purchased under generous incentives. 

68. Despite Distributor’s elevated inventories of LOGI product, LOGI continued to 

make large end-of-quarter sales to Distributor in FY09, selling some products even 

though Distributor already had excess quantities.

69. In Q209 and Q309, in an effort to reduce Distributor’s inventory, LOGI authorized 

extra-contractual returns and arranged “sideways” transactions or “channel to 

channel” sales, in which LOGI would find a purchaser, have the product returned or 

transferred from Distributor’s warehouse, and insulate Distributor from losing 

money on the sale. In Q209 and Q309, LOGI also accepted millions of dollars of 

excess returns from Distributor. LOGI characterized some of the returns as 

“sideways” transactions, claiming that the Company needed the inventory to satisfy 

a customer in another of its channels, and requesting that Distributor return the 

product.

70. LOGI actively sought buyers for Distributor’s inventory at lower prices than 

Distributor had paid, and then protected Distributor from losing money on the 

transactions. Specifically, LOGI credited Distributor at the original invoice price 

for the extra-contractual returns and then re-sold the product at lower prices.

71. Despite LOGI’s efforts to reduce Distributor’s inventory levels, Distributor still had 

excessive inventory of LOGI product in late FY09. As a result, LOGI and 

Distributor negotiated a special return of $12.5M of products, much of which LOGI 

had sold to Distributor over a year earlier. LOGI scrapped some of that product 

shortly after it was returned.

72. Along with the other concessions LOGI gave to Distributor in FY09, the special 

return was an indication that LOGI should not have recognized revenue on sales to 

Distributor upon “sell-in” in FY 09. Instead, GAAP required that LOGI recognize 

revenue from Distributor only upon Distributor’s sale of the product. 

73. If LOGI had switched to a “sell-through” model for Distributor at the beginning of 

FY09, as required by GAAP (assuming all general revenue recognition criteria 
15

were achieved upon “sell-through”), LOGI’s gross sales would have been $52M 

lower in FY09. Given LOGI’s reported operating income of $109M and gross 

margins of 31.3%, LOGI materially overstated its operating income by 

approximately $16.2M in FY09, as a result of its improperly recognizing revenue 

from Distributor.

Violations

74. As a result of the conduct described above, Logitech violated Sections 10(b), 13(a), 

13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Rules 10b-5, 12b-20, 13a-1, 

13a-11, and 13a-13 thereunder.

75. As a result of the conduct described in Paragraphs 28-54 above, Doktorczyk 

violated Section 13(b)(5) of the Exchange Act, and Rules 13a-14, 13b2-1 and 13b2-

2 thereunder, and caused Logitech’s violations of Sections 13(a), 13(b)(2)(A) and 

13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, 13a-11 and 13a-13

thereunder.

76. As a result of the conduct described in Paragraphs 28-54 above, Bolles violated 

Rule 13b2-1 promulgated under the Exchange Act, and caused Logitech’s 

violations of Sections 13(a), 13(b)(2)(A) and (B) of the Exchange Act, and Rules 

12b-20, 13a-1, 13a-11 and 13a-13 thereunder.

Logitech’s Remedial Efforts

In determining to accept the Offers, the Commission considered remedial acts promptly 

undertaken by LOGI and the cooperation LOGI afforded the Commission staff. 

IV.

In view of the foregoing, the Commission deems it appropriate to impose the sanctions 

agreed to in Respondents’ Offers.

Accordingly, pursuant to Section 21C of the Exchange Act, it is hereby ORDERED that:

A. Respondent Logitech International, S.A. shall cease and desist from committing or 

causing any violations and any future violations of Sections 10(b), 13(a), 

13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Rules 10b-5, 12b-20, 13a-1, 

13a-11, and 13a-13 thereunder.

B. Respondent Michael Doktorczyk shall cease and desist from committing or causing 

any violations and any future violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), 

and 13(b)(5) of the Exchange Act, and Rules 12b-20, 13a-1, 13a-11, 13a-13, 13a-14, 

13b2-1 and 13b2-2 thereunder.
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C. Respondent Sherralyn Bolles shall cease and desist from committing or causing any 

violations and any future violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B) of 

the Exchange Act, and Rules 12b-20, 13a-1, 13a-11, 13a-13, and 13b2-1 thereunder.

D. Respondent Logitech International, S.A. shall, within ten (10) days of the entry of 

this Order, pay a civil money penalty in the amount of $7,500,000 to the Securities 

and Exchange Commission. The Commission may distribute civil money penalties 

collected in this proceeding if, in its discretion, the Commission orders the 

establishment of a Fair Fund pursuant to 15 U.S.C. § 7246, Section 308(a) of the 

Sarbanes-Oxley Act of 2002, as amended. The Commission will hold funds paid 

pursuant to this paragraph in an account at the United States Treasury pending a 

decision whether the Commission, in its discretion, will seek to distribute funds or, 

subject to Exchange Act Section 21F(g)(3), transfer them to the general fund of the 

United States Treasury. If timely payment is not made, additional interest shall 

accrue pursuant to 31 U.S.C. § 3717.

E. Respondent Michael Doktorczyk shall, within ten (10) days of the entry of this 

Order, pay a civil money penalty in the amount of $50,000 to the Securities and 

Exchange Commission. The Commission may distribute civil money penalties 

collected in this proceeding if, in its discretion, the Commission orders the 

establishment of a Fair Fund pursuant to 15 U.S.C. § 7246, Section 308(a) of the 

Sarbanes-Oxley Act of 2002, as amended. The Commission will hold funds paid 

pursuant to this paragraph in an account at the United States Treasury pending a 

decision whether the Commission, in its discretion, will seek to distribute funds or, 

subject to Exchange Act Section 21F(g)(3), transfer them to the general fund of the 

United States Treasury. If timely payment is not made, additional interest shall 

accrue pursuant to 31 U.S.C. § 3717.

F. Respondent Sherralyn Bolles shall pay a civil penalty of $25,000 to the Securities 

and Exchange Commission. The Commission may distribute civil money penalties 

collected in this proceeding if, in its discretion, the Commission orders the 

establishment of a Fair Fund pursuant to 15 U.S.C. § 7246, Section 308(a) of the 

Sarbanes-Oxley Act of 2002, as amended. The Commission will hold funds paid 

pursuant to this paragraph in an account at the United States Treasury pending a 

decision whether the Commission, in its discretion, will seek to distribute funds or, 

subject to Exchange Act Section 21F(g)(3), transfer them to the general fund of the 

United States Treasury. Payment shall be made in the following installments: 

$12,500, within ten days of the date of this Order; $12,500 by January 31, 2017. If 

any payment is not made by the date the payment is required by this Order, the 

entire outstanding balance of the civil penalty, plus any additional interest accrued 

pursuant to 31 U.S.C. § 3717, shall be due and payable immediately, without further 

application.
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G. Payment must be made in one of the following ways: 

(1) Respondents may transmit payment electronically to the Commission, 

which will provide detailed ACH transfer/Fedwire instructions upon 

request; 

(2) Respondents may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or 

(3) Respondents may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to: 

Enterprise Services Center

Accounts Receivable Branch

HQ Bldg., Room 181, AMZ-341

6500 South MacArthur Boulevard

Oklahoma City, OK 73169

Payments by check or money order must be accompanied by a cover letter identifying 

Logitech International, S.A., Michael Doktorczyk, or Sherralyn Bolles as a Respondent in these 

proceedings, and the file number of these proceedings; a copy of the cover letter and check or 

money order must be sent to Gerald Hodgkins, Esq., Division of Enforcement, Securities and 

Exchange Commission, 100 F St., NE, Washington, DC 20549-6561. 

O. Such civil money penalty may be distributed pursuant to Section 308(a) of the 

Sarbanes-Oxley Act of 2002, as amended (“Fair Fund distribution”). Regardless of whether any 

such Fair Fund distribution is made, amounts ordered to be paid as civil money penalties pursuant 

to this Order shall be treated as penalties paid to the government for all purposes, including all tax 

purposes. To preserve the deterrent effect of the civil penalty, Respondents agree that in any 

Related Investor Action, Respondents shall not argue that Respondents are entitled to, nor shall 

they benefit by, offset or reduction of any award of compensatory damages by the amount of any 

part of Respondents’ payment of a civil penalty in this action ("Penalty Offset"). If the court in any 

Related Investor Action grants such a Penalty Offset, Respondents agree that they shall, within 30 

days after entry of a final order granting the Penalty Offset, notify the Commission's counsel in this 

action and pay the amount of the Penalty Offset to the Securities and Exchange Commission. Such 

a payment shall not be deemed an additional civil penalty and shall not be deemed to change the 

amount of the civil penalty imposed in this proceeding. For purposes of this paragraph, a "Related 

Investor Action" means a private damages action brought against Respondent by or on behalf of 

one or more investors based on substantially the same facts as alleged in the Order instituted by the 

Commission in this proceeding.
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V.

It is further Ordered that, for purposes of exceptions to discharge set forth in Section 523 of 

the Bankruptcy Code, 11 U.S.C. §523, the findings in this Order are true and admitted by

Respondent, and further, any debt for disgorgement, prejudgment interest, civil penalty or other 

amounts due by Respondent under this Order or any other judgment, order, consent order, decree 

or settlement agreement entered in connection with this proceeding, is a debt for the violation by 

Respondent of the federal securities laws or any regulation or order issued under such laws, as set 

forth in Section 523(a)(19) of the Bankruptcy Code, 11 U.S.C. §523(a)(19).

By the Commission.

Brent J. Fields

Secretary