Audiovox 1998 Annual Report Download - page 30

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 disposed of are reported at the lower
of the carrying amount or fair value less cost to sell. Adoption
of Statement 121 did not have a material impact on the
Company’s financial position, results of operations or liquidity.
(u) Accounting for Stock-Based Compensation
Prior to December 1, 1996, the Company accounted for
its stock option plan in accordance with the provisions of
Accounting Principles Board Opinion No. 25, “Accounting
for Stock Issued to Employees” (Opinion 25), and related
interpretations. As such, compensation expense would be
recorded on the date of grant only if the current market
price of the underlying stock exceeded the exercise price.
On December 1, 1996, the Company adopted Statement
No. 123, “Accounting for Stock-Based Compensation”
(Statement 123), which permits entities to recognize, as
expense over the vesting period, the fair value of all stock-
based awards on the date of grant. Alternatively, Statement
123 also allows entities to continue to apply the provisions
of Opinion 25 and provide pro-forma net income and pro-
forma earnings per share disclosures for employee stock
option grants made in fiscal 1996 and future years as if the
fair-value-based method defined in Statement 123 had been
applied. The Company has elected to continue to apply the
provisions of Opinion 25 and provide the pro-forma disclo-
sure provisions of Statement 123.
(v) Reporting Comprehensive Income
In June 1997, the FASB issued Statement No. 130,
“Reporting Comprehensive Income” (Statement 130).
Statement 130 requires that all items that are required to be
recognized under accounting standards as components of
comprehensive income be reported in a financial statement
that is displayed with the same prominence as other finan-
cial statements. Statement 130 further requires that an entity
display an amount representing total comprehensive income
for the period in that financial statement. Statement 130 also
requires that an entity classify items of other comprehensive
income by their nature in a financial statement. For example,
other comprehensive income may include foreign currency
items and unrealized gains and losses on investments in
equity securities. Reclassification of financial statements for
earlier periods, provided for comparative purposes, is
required. Based on current accounting standards, Statement
130 is not expected to have a material impact on the
Company’s financial position, results of operation or liquid-
ity. The Company will adopt this accounting standard effec-
tive December 1, 1998, as required.
(w) Disclosure About Segments of an Enterprise and
Related Information
In June 1997, the FASB issued Statement No. 131,
“Disclosures about Segments of an Enterprise and Related
Information” (Statement 131). Statement 131 establishes
standards for reporting information about operating seg-
ments in annual financial statements and requires selected
information about operating segments in interim financial
reports issued to shareholders. It also establishes standards
for related disclosures about products and services, geo-
graphic areas and major customers. Operating segments
are defined as components of an enterprise about which
separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance.
Statement 131 requires reporting segment profit or loss,
certain specific revenue and expense items and segment
assets. It also requires reconciliations of total segment rev-
enues, total segment profit or loss, total segment assets,
and other amounts disclosed for segments to correspond-
ing amounts reported in the consolidated financial state-
ments. Restatement of comparative information for earlier
periods presented is required in the initial year of applica-
tion. Interim information is not required until the second
year of application, at which time comparative information is
required. The Company has not determined the impact that
the adoption of this new accounting standard will have on
its consolidated financial statements disclosures. The
Company will adopt this accounting standard in fiscal 1999,
as required, however, Statement 131 will not have any
impact on the Company’s financial position, results of oper-
ations or liquidity.
(2) Business Acquisitions/
Dispositions
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.
In April 1996, the Company formed Audiovox Holdings (M)
Sdn. Bhd. (Audiovox Holdings) and Audiovox Communications
(Malaysia) Sdn. Bhd. (Audiovox Communications), which are
80% and 72%-owned subsidiaries of Audiovox Asia, Inc.
(Audiovox Asia), respectively, which, in turn, is a wholly-
owned subsidiary of the Company. In 1996, Audiovox
Communications formed Vintage Electronics Holdings
(Malaysia) Sdn. Bhd., a wholly-owned subsidiary. The
Company formed these subsidiaries to assist in its planned
expansion of its international business.
In October 1996, the Company contributed the net assets
of its cellular division into a newly-formed, wholly-owned
subsidiary Audiovox Communications Corp. (ACC).
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
AUDIOVOX CORPORATION AND SUBSIDIARIES