19 Revenue Recognition Inventory Reserves Allowance for Doubtful Accounts Accounting for Income Taxes We believe the following critical accounting poli- cies and estimates affect the significant estimates and  judgments we use in the preparation of our consolidated  financial statements, and may involve a higher degree of  judgment and complexity than others. Revenue is recognized when there is persuasive evidence  that an arrangement exists, when delivery has occurred,  when our price to the buyer is fixed or determinable and  when collectibility of the receivable is reasonably assured.  These elements are met when title to the products is  passed to the buyers, which is generally when our prod- uct is shipped to both original equipment manufacturers  (OEMs) and electronics component distributors.  We reduce revenue in the period of sale for estimates  of product returns, distributor price adjustments and  other allowances, the majority of which are related to  our North American operations. Our reserve estimates  are based upon historical data as well as projections of  revenues, distributor inventories, price adjustments,  average selling prices and market conditions. Actual  returns and adjustments could be significantly differ- ent from our estimates and provisions, resulting in an  adjustment to revenues. Inventories are stated at the lower of cost or market  value. Cost is determined principally by the first-in, first-out method. On an on-going basis, we evaluate our inventory, both finished goods and raw material, for obsolescence and slow-moving items. This evalua- tion includes analysis of sales levels, sales projections,  and purchases by item, as well as raw material usage  related to our manufacturing facilities. Based upon this analysis, as well as an inventory aging analysis, we accrue a reserve for obsolete and slow-moving  inventory. If future demand or market conditions are  different than our current estimates, an inventory  adjustment may be required, and would be reflected in cost of goods sold in the period the revision is made. Management evaluates the collectability of our accounts  receivable based upon a combination of factors, includ- ing the current business environment and historical  experience. If we are aware of a customer’s inability to  meet its financial obligations to us, we record an allow- ance to reduce the receivable to the amount we reason- ably believe we will be able to collect from the customer.  For all other customers, we record an allowance based  upon the amount of time the receivables are past due. If actual accounts receivable collections differ from these  estimates, an adjustment to the allowance may be neces- sary with a resulting effect on operating expense. As part of the process of preparing our consolidated  financial statements, we are required to estimate our  income taxes in each of the tax jurisdictions in which we operate. This process involves using an asset and liability approach whereby deferred tax assets and liabilities are recorded for differences in the financial reporting bases and tax bases of the Company’s assets  and liabilities. Significant management judgment is  required in determining our provision for income taxes, deferred tax assets and liabilities. Management  continually evaluates its deferred tax asset as to whether  it is likely that the deferred tax assets will be realized. If management ever determined that its deferred tax  asset was not likely to be realized, a write-down of the  asset would be required and would be reflected as an  expense in the accompanying period.