Audiovox 1999 Annual Report Download - page 26

AUDIOVOX
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translated at either current or historical exchange rates, as appropriate.
These adjustments, along with gains and losses on currency transactions,
are reflected in the consolidated statements of income.
Exchange gains and losses on hedges of foreign net investments and
on intercompany balances of a long-term nature are also recorded in the
cumulative foreign currency translation adjustment account in accumu-
lated other comprehensive income. Exchange gains and losses on avail-
able-for-sale investment securities and the related hedge of such
investment securities is recorded in the unrealized gain (loss) on mar-
ketable securities in accumulated other comprehensive income. Other for-
eign currency transaction gains (losses) of $871 and $(1,046) for the years
ended November 30, 1998 and 1999, respectively, were included in other
income. Other foreign currency gains and losses were not material for the
year ended November 30, 1997.
(p) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax conse-
quences attributable to differences between the financial statement car-
rying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(q) Net Income Per Common Share
In February 1997, the FASB issued Statement No. 128, “Earnings per
Share” (Statement 128). Statement 128 replaces the calculation of pri-
mary and fully diluted earnings per share with basic and diluted earnings
per share. Basic earnings per share excludes any dilution. It is based upon
the weighted average number of common shares outstanding during the
period. Diluted earnings per share reflects the potential dilution that
would occur if securities or other contracts to issue common stock were
exercised or converted into common stock. The Company adopted
Statement 128 in fiscal 1998. Earnings per share amounts for all periods
presented have been restated to conform to the new presentation.
(r) Supplementary Financial Statement Information
Advertising expenses approximated $16,981, $15,789 and $15,390 for
the years ended November 30, 1997, 1998 and 1999, respectively.
Interest income of approximately $1,525, $896 and $943 for the years
ended November 30, 1997, 1998 and 1999, respectively, is included in
other, net, in the accompanying consolidated statements of income.
(s) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and disclosure of the contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
(t) Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of
The Company accounts for its long-lived assets in accordance with the
provisions of Statement of Financial Accounting Standards No.121,
“Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of ” (Statement 121). Statement 121 requires that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by comparison of the carrying
amount of an asset to the future net cash flows expected to be generated
by the asset. If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of assets. Assets to be dis-
posed of are reported at the lower of the carrying amount or fair value
less cost to sell.
(u) Accounting for Stock-Based Compensation
The Company applies the intrinsic value-based method of accounting
prescribed by Accounting Principles Board (APB) Opinion No. 25,
“Accounting for Stock Issued to Employees”, and related interpretations,
in accounting for its stock-based compensation plans.
(v) Reporting Comprehensive Income
Effective December 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, “Reporting Comprehensive
Income” (Statement 130). Statement 130 requires that all items recog-
nized under accounting standards as components of comprehensive
income be reported in an annual financial statement that is displayed
with the same prominence as other annual financial statements. Other
comprehensive income may include foreign currency translation adjust-
ments, minimum pension liability adjustments and unrealized gains and
losses on investment securities classified as available-for-sale. The
Company adopted this accounting standard effective December 1, 1998,
as required. Prior year financial statements have been reclassified to con-
form to the presentation required by Statement 130.
(w) Reclassifications
Certain reclassifications have been made to the 1997 and 1998 consol-
idated financial statements in order to conform to the 1999 presentation.
(2) Business Acquisitions
During 1997, the Company formed Audiovox Venezuela C.A. (Audiovox
Venezuela), an 80%-owned subsidiary, for the purpose of expanding its
international business. The Company made an initial investment of $478
which was used by Audiovox Venezuela to obtain certain licenses, per-
mits and fixed assets.
(3) Issuance of Subsidiary Shares
On March 31, 1999, Toshiba Corporation, a major supplier, purchased
5% of the Company’s subsidiary, Audiovox Communications Corp. (ACC), a
supplier of wireless products for $5,000 in cash. The Company currently
Notes to Consolidated
FINANCIAL STATEMENTS (continued) Audiovox Corporation and Subsidiaries