Audiovox 2003 Annual Report Download - page 82

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)
there was no impact upon the adoption of EITF 01−9, "Accounting for
Consideration Given by a Vendor to a Customer (Including a Reseller of
Vendor's Products)" (EITF 01−9), as the Company's accounting policy
prior to March 1, 2002 was consistent with its accounting policy after
the adoption of EITF 01−9.
Other trade allowances are additional sales incentives that the
Company provides to the Electronics segment customers subsequent to
the related revenue being recognized. In accordance with EITF 01−9,
the Company records the provision for these additional sales
incentives at the later of when the sales incentive is offered or when
the related revenue is recognized. Such additional sales incentives
are based upon a fixed percentage of the selling price to the
customer, a fixed amount per unit, or a lump−sum amount.
The accrual for sales incentives at November 30, 2002 and 2003 was
$12,151 and $21,894, respectively. The Company's sales incentive
liability may prove to be inaccurate, in which case the Company may
have understated or overstated the provision required for these
arrangements. Therefore, although the Company makes its best estimate
of its sales incentive liability, many factors, including significant
unanticipated changes in the purchasing volume of its customers and
the lack of claims made by customers of offered and accepted sales
incentives, could have a significant impact on the Company's liability
for sales incentives and the Company's reported operating results.
For the fiscal years ended November 30, 2001, 2002 and 2003, reversals
of previously established sales incentive liabilities amounted to
$14,369, $4,716 and $2,940, respectively. These reversals include
unearned sales incentives and unclaimed sales incentives. Unearned
sales incentives are volume incentive rebates where the customer did
not purchase the required minimum quantities of product during the
specified time. Volume incentive rebates for both segments are
reversed into income in the period when the customer did not purchase
the required minimum quantities of product during the specified time.
Unearned sales incentives for fiscal years ended November 30, 2001,
2002 and 2003 amounted to $9,051, $1,354 and $1,310, respectively.
Unclaimed sales incentives are sales incentives earned by the customer
but the customer has not claimed payment of the earned sales incentive
from the Company. Unclaimed sales incentives for fiscal years ended
November 30, 2001, 2002 and 2003 amounted to $5,318, $3,362 and
$1,630, respectively.
The accrual for earned but unclaimed sales incentives is reversed by
Wireless only when management is able to conclude, based upon an
individual judgement of each sales incentive, that it is remote that
the customer will claim the sales incentive. The methodology applied
for determining the amount and timing of reversals for the Wireless
(Continued)
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