Audiovox 2004 Annual Report Download - page 33

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Strategy
The key elements of the Company's strategy are to:
o Capitalize on niche market opportunities in the electronics industry,
o Leverage its distribution network,
o Increase market penetration by enhancing and capitalizing on the
Audiovox(R) family of brands,
o Pursue strategic and complementary acquisitions,
o Grow its international presence,
o Continue to outsource manufacturing to increase operating leverage,
and
o Continue to monitor operating expenses.
Critical Accounting Policies and Estimates
General
The consolidated financial statements of the Company are prepared in
conformity with accounting principles generally accepted in the United States of
America. As such, the Company is required to make certain estimates, judgments
and assumptions that management believes are reasonable based upon the
information available. These estimates and assumptions, which can be subjective
and complex, affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the dates of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting periods. As a result, actual results could differ from such
estimates and assumptions. The significant accounting policies which the Company
believes are the most critical to aid in fully understanding and evaluating the
reported consolidated financial results include the following:
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 FOB Shipping Point or FOB
Destination, based upon terms established with 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 Company's
selling price to its customers is a fixed amount that is not subject to refund
or adjustment or contingent upon additional rebates.
Sales Incentives
The Company offers sales incentives to its customers in the form of (1)
co−operative advertising allowances; (2) market development funds; (3) volume
incentive rebates and (4) other trade allowances. The Company accounts for sales
incentives in accordance with EITF 01−9, "Accounting for Consideration Given by
a Vendor to a Customer (Including a Reseller of Vendor's Products)" (EITF 01−9).
The terms of sales incentives are offered from time to time and vary by
customer. 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 customers to claim the sales incentive within a
certain time period (referred to as the "claim period") and claims 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
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