Audiovox 2004 Annual Report Download - page 138

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Audiovox Specialized Applications, LLC And Subsidiary
Notes To Financial Statements
Income taxes:
The members have elected to be taxed for federal and state income tax purposes
as a limited liability company under the provisions of the respective income tax
codes. Under these provisions, the members report net income of the Company on
their corporate income tax returns.
Long−lived assets, goodwill and other intangible assets:
In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard ("SFAS") No. 141, Business Combinations, and
SFAS No. 142. SFAS No. 141 requires that the purchase method of accounting be
used for all future business combinations and specifies criteria intangible
assets acquired in a business combination must meet to be recognized and
reported apart from goodwill.
Statement of Financial Accounting Standard ("SFAS") No. 142, Goodwill and Other
Intangible Assets, requires that goodwill and intangible assets with indefinite
useful lives no longer be amortized, but instead tested for impairment at least
annually or more frequently if an event occurs or circumstances change that
could more likely than not reduce the fair value of a reporting unit below its
carrying amount.
As a result of adopting the provisions of SFAS No. 142, the Company did not
record amortization expense relating to its goodwill or its trademark rights.
For intangible assets with indefinite lives, including goodwill, the Company
performed its annual impairment test, which resulted in a $300,000 impairment
adjustment during the year ended November 30, 2004 (See Note 8).
In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of
Long−Lived Assets, the Company reviews its long−lived assets periodically to
determine potential impairment by comparing the carrying value of the long−lived
assets with the estimated future net undiscounted cash flows expected to result
from the use of the assets, including cash flows from disposition. Should the
sum of the expected future net cash flows be less that the carrying value, the
Company would recognize an impairment loss at that date. An impairment loss
would be measured by comparing the amount by which the carrying value exceeds
the fair value of the long−lived assets. The Company performed its annual
impairment test, which indicated no reduction is required.
Exhibit 99.1
9