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Audiovox Specialized Applications, LLC And Subsidiary
(A Limited Liability Company)
Notes To Financial Statements
Advertising costs:
The Company expenses the cost of advertising (including trade shows), as incurred. Advertising costs in the accompanying
statements of income were approximately $629,000, $576,000 and $819,000, for the years ended November 30, 2007, 2006, and 2005
respectively.
Long-lived assets, goodwill and other intangible assets:
In July 2001, the FASB issued Statement of Financial Accounting Standard (“SFAS”) No. 141, “Business Combinations”, and SFAS
No. 142. SFAS No. 141 requires that the purchase method of accounting be used for all future business combinations and specifies
criteria intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill.
SFAS No. 142, “Goodwill and Other Intangible Assets”, requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead be tested for impairment at least annually or more frequently if an event occurs or circumstances
change that could more likely than not reduce the fair value of a reporting unit below its carrying amount.
As a result of adopting the provisions of SFAS No. 142, the Company did not record amortization expense relating to its goodwill or
its trademark rights. For intangible assets with indefinite lives, including goodwill, the Company performed its annual impairment
test. There was no impairment on the trademark rights for the years ended November 30, 2007, 2006 and 2005.
In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company reviews its
long-lived assets periodically to determine potential impairment by comparing the carrying value of the long-lived assets with the
estimated future net undiscounted cash flows expected to result from the use of the assets, including cash flows from
disposition. Should the sum of the expected future net cash flows be less than the carrying value, the Company would recognize an
impairment loss at that date. An impairment loss would be measured by comparing the amount by which the carrying value exceeds
the fair value of the long-lived assets. There was no impairment of long-lived assets for the years ended November 30, 2007, 2006
and 2005.
New accounting pronouncements:
In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48 (FIN 48), “Accounting for
Uncertainty in Income Taxes – an interpretation of FASB Statement 109”. FIN 48 clarifies the accounting for uncertainty in income
taxes recognized in an enterprise's financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes”.
FIN 48 prescribes a comprehensive model for recognizing, measuring, presenting and disclosing in the financial statements tax
positions taken or expected to be taken on a tax return. If there are changes in net assets as a result of application of FIN 48 these will
be accounted for as an adjustment to the opening balance of retained earnings. Additional disclosures about the amounts of such
liabilities will be required also. In February 2008, the FASB delayed the effective date of FIN 48 for certain nonpublic enterprises to
annual financial statements for fiscal years beginning after December 15, 2007. The Company will be required to adopt FIN 48 in its
2008 annual financial statements. Management is currently assessing the impact of FIN 48 on its consolidated financial position and
results of operations.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. This statement clarifies the definition of fair value,
establishes a framework for measuring fair value and expands the disclosures on fair value measurements. SFAS No. 157 is effective
for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact that this statement will have on
its financial position or results of operations.
10
Source: AUDIOVOX CORP, 10-K, May 14, 2008