Audiovox 2003 Annual Report Download - page 69

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Venezuelan Bolivar and set the currency at a stated government rate.
Accordingly, until further guidance is issued, the Company's 80% owned
Venezuelan subsidiary will translate its financial statements utilizing the
stated government rate.
To the extent that the Company expands its operations into Europe, Latin
America and the Pacific Rim, the effects of inflation and currency fluctuations
in those areas could have growing significance to its financial condition and
results of operations. Fluctuations in the foreign exchange rates in Europe and
Pacific Rim countries have not had a material adverse effect on the Company's
consolidated financial position, results of operations or liquidity.
While the prices that the Company pays for the products purchased from its
suppliers are principally denominated in United States dollars, price
negotiations depend in part on the relationship between the foreign currency of
the foreign manufacturers and the United States dollar. This relationship is
dependent upon, among other things, market, trade and political factors.
Seasonality
The Company typically experiences some seasonality in its operations. The
Company generally experiences a substantial amount of its sales during
September, October and November. December is also a key month for the Company
due to increased demand for its products during the holiday season. This
increase results from increased promotional and advertising activities from the
Company's customers to end−users.
Off−Balance Sheet Arrangements
The Company does not maintain any off−balance sheet arrangements,
transactions, obligations or other relationships with unconsolidated entities
that would be expected to have a material current or future effect upon our
financial condition or results of operations.
Recent Accounting Pronouncements
In November 2002, the FASB issued Interpretation No. 45 (FIN 45),
"Guarantor's Accounting and Disclosure Requirements for Guarantors, Including
Guarantees of Indebtedness of Others". FIN 45 elaborates on the disclosures to
be made by a guarantor in its interim and annual financial statements about its
obligations under certain guarantees that it has issued. It also clarifies that
a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The initial recognition and initial measurement provisions of FIN 45
are applicable on a prospective basis to guarantees issued or modified after
December 31, 2002, irrespective of the guarantor's fiscal year end. The
disclosure requirements of FIN 45 are effective for financial statements of
interim or annual periods ending after December 15, 2002. The Company adopted
FIN 45 during the quarter ended May 31, 2003. The adoption of FIN 45 did not
have a material effect on the Company's consolidated financial position or
results of operations.
In April 2003, the FASB issued SFAS No. 149 (SFAS No. 149), "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities". SFAS No. 149
amends and clarifies the accounting guidance on derivative instruments
(including certain derivative instruments embedded in other contracts) and
hedging activities that fall within the scope of SFAS No. 133, "Accounting for
67