Accounts Receivable and Allowances for Doubtful Accounts

9 Months Ended

Oct. 01, 2011

Accounts Receivable and Allowances for Doubtful Accounts [Abstract]

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

NOTE 8. ACCOUNTS RECEIVABLE AND ALLOWANCES FOR DOUBTFUL ACCOUNTS

Cadence’s Receivables, net balance on its Condensed Consolidated Balance Sheets includes invoiced accounts receivable and the current portion of unbilled installment contract receivables. Installment contract receivables represent amounts Cadence has recorded as revenue for which payments from a customer are due over time. Cadence’s accounts receivable and installment contract receivables were initially recorded at fair value. Cadence discounts the total product portion of the agreements to reflect the interest component of the transaction and amortizes the interest component of the transaction. The interest component is recognized as Product revenue over the period in which payments are made and balances are outstanding, using the effective interest method. Cadence determines the discount rate at the outset of the arrangement based upon the current credit rating of the customer. Cadence resets the discount rate periodically considering changes in prevailing interest rates but does not adjust previously discounted balances. Cadence’s long-term Installment contract receivables balance on its Condensed Consolidated Balance Sheets includes installment contract receivable balances to be invoiced at future dates more than one year after each balance sheet date.

Cadence’s accounts receivable and installment contact receivables balances as of October 1, 2011 and January 1, 2011 were as follows:

	As of
	October 1, 2011			January 1, 2011
	(In thousands)
Accounts receivable	$	123,278		$	112,494
Installment contract receivables, short-term		29,220			87,003
Installment contract receivables, long-term		9,178			23,380
Total accounts receivable and installment contract receivables		161,676			222,877
Less allowance for doubtful accounts		(65	)		(7,604	)
Total accounts receivable, net and installment contract receivables	$	161,611		$	215,273

Each fiscal quarter, Cadence makes judgments as to its ability to collect outstanding receivables, and provides allowances for a portion of its receivables when collection is not probable. Cadence analyzes the creditworthiness of its customers, historical experience, changes in customer demand and the overall economic climate in the industries that Cadence serves. Provisions are made based upon a specific review of customer receivables and are recorded in operating expenses.

Cadence’s customers are primarily concentrated within the semiconductor industry. As of October 1, 2011, no single customer accounted for more than 10% of Cadence’s total current and long-term receivables, net. As of January 1, 2011, one customer accounted for 19% of Cadence’s total current and long-term receivables, net. As of October 1, 2011, approximately 40% of Cadence’s total current and long-term receivables, net, were attributable to the ten customers with the largest balances of Receivables, net and Installment contract receivables. As of January 1, 2011, approximately half of Cadence’s total current and long-term receivables, net, were attributable to the ten customers with the largest balances of total current and long-term receivables, net.

The following table presents the change in Cadence’s allowance for doubtful accounts for the nine months ended October 1, 2011:

			Addition
	As of January 1, 2011		Charged (Credited) to Costs and Expenses			Charged (Credited) to Other Accounts		Deductions (1)			As of October 1, 2011
Allowance for doubtful accounts	$	7,604	$	(6,596	)	$	—	$	(943	)	$	65

(1) Uncollectible accounts written-off, net of recoveries.