Audiovox 2004 Annual Report Download - page 135

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Audiovox Specialized Applications, LLC and Subsidiary
Notes to Financial Statements
Note 1. Nature of Business, Use of Estimates, and Significant Accounting
Policies
Nature of business:
Audiovox Specialized Applications ("ASA") "The Mobile Electronics Company" is an
international supplier of mobile electronics for the Automotive Industry
including: Recreational Vehicle, Van/SUV Conversion, Commercial Vehicle, Heavy
Duty Truck, Agricultural, Construction, Bus, Limousine, and Marine industries.
Its proprietary line of products include: Flexvision LCD Entertainment Systems,
including DVD and video cassette players; Voyager Rear Observation and Bus
Monitor/PA Systems and radios; Nextgen Modular Chassis Systems; Aquatronics
Marine Radios, Speakers, and Housings; Jensen Marine Radios and other
Audio/Video Products; Heavy Duty Systems, Radios and other Audio Products; and
CruiseTV satellite television systems. These products are sold to customers
throughout the world, generally on 30−day terms. ASA is headquartered in
Elkhart, Indiana and has public distribution centers in Texas and California.
Use of estimates:
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Significant accounting policies:
Revenue recognition:
The Company recognizes revenue from product sales at the time of passage of
title and risk of loss to the customer either at F.O.B. Shipping Point or F.O.B.
Destination, based upon terms established with the customer. The Company's price
is fixed and determined at the time of shipment and collectability is reasonably
assured and not contingent upon the customer's resale of the product. The
customers are generally not given rights of return nor are sales incentives
provided. In the event customers are granted rights of return, the Company
records an allowance for future returns. At November 30, 2004 and 2003, no such
allowance was deemed necessary. The product sale is not subject to acceptance or
installation by Company or customer personnel.
The Company recognizes royalty revenue at the time the related product is sold
to a third party by Audiovox Corporation ("Audiovox"), a member of ASA, under
the terms of the related royalty agreement. Total royalty revenue under this
agreement for the years ended November 30, 2004, 2003, and 2002 was
approximately $2,103,000, $3,253,000, and $3,140,000 respectively.
Members' equity:
In accordance with the generally accepted method of presenting limited liability
company financial statements, the accompanying financial statements do not
include other corporate assets and liabilities of the members, including their
Exhibit 99.1
6