Audiovox 2003 Annual Report Download - page 80

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AUDIOVOX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
November 30, 2001, 2002 and 2003
(Dollars in thousands, except share and per share data)
the customer. Any customer acceptance provisions, which are related to
product testing, are satisfied prior to revenue recognition. There are
no further obligations on the part of the Company subsequent to
revenue recognition except for returns of product from the Company's
customers. The Company does accept returns of products if properly
requested, authorized and approved by the Company. The Company records
an estimate of returns of products to be returned by its customers.
Management continuously monitors and tracks such product returns and
records the provision for the estimated amount of such future returns,
based on historical experience and any notification the Company
receives of pending returns. The Electronics segment's selling price
to its customers is a fixed amount that is not subject to refund or
adjustment or contingent upon additional rebates.
The Wireless segment has sales agreements with certain customers that
provide for a rebate of the selling price to such customers if the
particular product is subsequently sold at a lower price to the same
customer or to a different customer. The rebate period extends for a
relatively short period of time. Historically, the amounts of such
rebates paid to customers have not been material. The Company
estimates the amount of the rebate based upon the terms of each
individual arrangement, historical experience and future expectations
of price reductions, and the Company records its estimate of the
rebate amount at the time of the sale.
(e) Sales Incentives
Both of the Company's segments, Wireless and Electronics, offer sales
incentives to its customers in the form of (1) co−operative
advertising allowances; (2) market development funds and (3) volume
incentive rebates. The Electronics segment also offers other trade
allowances to its customers. The terms of the sales incentives vary by
customer and are offered from time to time. Except for other trade
allowances, all sales incentives require the customer to purchase the
Company's products during a specified period of time. All sales
incentives require the customer to claim the sales incentive within a
certain time period. Although all sales incentives require customers
to claim the sales incentive within a certain time period (referred to
as the "claim period"), the Wireless segment historically has settled
sales incentives claimed after the claim period has expired if a
customer demands payment. The sales incentive liabilities are settled
either by the customer claiming a deduction against an outstanding
account receivable owed to the Company by the customer or by the
customer requesting a check from the Company. The Company is unable to
demonstrate that an identifiable benefit of the sales incentives has
been received as such, all costs associated with sales incentives are
classified as a reduction of net sales. The following is a summary of
the various sales incentive programs offered by the Company and the
related accounting policies:
(Continued)
79