Avnet 2002 Annual Report Download - page 59

AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of signiÑcant accounting policies:
Principles of consolidation Ì The accompanying consolidated Ñnancial statements include the accounts
of the Company and all of its subsidiaries. All intercompany accounts and transactions have been eliminated.
EÅective June 8, 2001, the Company acquired Kent Electronics Corporation (""Kent'') in a transaction
accounted for as a ""pooling-of-interests.'' Accordingly, the accompanying consolidated Ñnancial statements
and notes for periods prior to the acquisition have been restated to reÖect the acquisition of Kent (see Note 2).
Cash equivalents Ì The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
Inventories Ì Inventories, comprised principally of Ñnished goods, are stated at cost (Ñrst-in, Ñrst-out) or
market, whichever is lower.
Investments Ì Investments in joint ventures and entities in which the Company has an ownership
interest greater than 50% and exercises control over the venture are consolidated in the accompanying
consolidated Ñnancial statements. Minority interests in the years presented, which amounts are not material,
are included in the caption ""accrued expenses and other'' on the accompanying consolidated balance sheets.
The Company invests from time to time in ventures in which the Company's ownership interest is less than
20% and over which the Company does not exercise signiÑcant inÖuence. Such investments are accounted for
under the cost method. The fair values for investments not traded on a quoted exchange are estimated based
upon the performance of the ventures historically, the ventures' forecasted Ñnancial performance and
management's evaluation of the ventures' viability and business models. To the extent the book value of an
investment exceeds its assessed fair value, the Company will record an appropriate impairment charge (see
Note 17). Thus, the carrying value of the Company's investments approximates fair value.
Depreciation and amortization Ì Depreciation and amortization is generally provided for by the straight-
line method over the estimated useful lives of the assets. The estimated useful lives for depreciation and
amortization are typically as follows: buildings Ì 30 years; machinery, Ñxtures and equipment Ì 2-10 years;
and leasehold improvements Ì over the applicable remaining lease term or useful life if shorter. Internal use
software costs are expensed or capitalized depending upon the stage of the project, in accordance with the
AICPA's Statement of Position 98-1, ""Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use.'' Amortization of internal use software costs commences upon the project's
completion and extends over the estimated useful life, typically ranging from 5-7 years.
Long-lived assets Ì Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be recoverable. The Company
continually evaluates the carrying value and the remaining economic useful life of all long-lived assets and will
adjust the carrying value and the related depreciation and amortization period if and when appropriate.
Goodwill Ì Goodwill represents the excess of the purchase price over the fair value of net assets
acquired. Except for an immaterial amount of goodwill applicable to purchases made before October 31, 1970,
goodwill was amortized on a straight-line basis over 40 years through June 29, 2001. The Company has
adopted the Financial Accounting Standards Board's (""FASB'') Statement of Financial Accounting Stan-
dards No. 141 (""SFAS 141''), ""Business Combinations,'' which requires that all business combinations
initiated after June 30, 2001 be accounted for under the purchase method and that certain identiÑable
intangible assets be recognized as assets apart from goodwill. The Company has no other material identiÑable
intangible assets besides goodwill. The Company also elected to early adopt the provisions of the FASB's
Statement of Financial Accounting Standards No. 142 (""SFAS 142''), ""Goodwill and Other Intangible
Assets,'' eÅective June 30, 2001, the Ñrst day of the Company's Ñscal year 2002. SFAS 142 requires that
ratable amortization of goodwill be replaced with periodic tests for goodwill impairment (see Note 6).
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