Audiovox 2005 Annual Report Download - page 63

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AUDIOVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2003, 2004 AND 2005
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER−SHARE DATA)
(1) Description of Business and Summary of Significant Accounting Policies
(a) Description of Business and Accounting Principles
Audiovox Corporation and subsidiaries (the "Company") design and
market a diverse line of electronic products throughout the
world. The Company completed the divestiture of the Cellular
Group on November 1, 2004 and Audiovox Malaysia on November 7,
2005 (See Note 2). The Company operates in the Electronics
market and has one reportable segment ("Electronics"), which is
broken down into two product categories: Mobile Electronics and
Consumer Electronics.
The financial statements and accompanying notes are prepared in
accordance with accounting principles generally accepted in the
United States of America.
(b) Principles of Consolidation
The consolidated financial statements include the financial
statements of Audiovox Corporation and its wholly owned and
majority−owned subsidiaries. Minority interest of majority−owned
subsidiaries are calculated based upon the respective minority
ownership percentage and included in the accompanying
consolidated balance sheets. All significant intercompany
balances and transactions have been eliminated in consolidation.
Equity investments in which the Company exercises significant
influence but does not control and is not the primary
beneficiary are accounted for using the equity method. The
Company's share of its equity method investees earnings or
losses is included in the consolidated statements of operations.
The Company eliminates its pro rata share of gross profit on
sales to its equity method investees for inventory on hand at
the investee at the end of the year. Investments in which the
Company is not able to exercise significant influence over the
investee are accounted for under the cost method.
(c) Use of Estimates
The preparation of financial statements requires the Company to
make estimates and assumptions that affect reported amounts of
assets, liabilities, revenue and expenses. Such estimates
include the allowance for doubtful accounts, inventory
valuation, recoverability of deferred tax assets, valuation of
long−lived assets, accrued sales incentives, warranty reserves
and disclosure of the contingent assets and liabilities at the
date of the consolidated financial statements. Actual results
could differ from those estimates.
(d) Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents consist of demand deposits with banks
and highly liquid money market funds with original maturities of
three months or less when purchased. Cash equivalents amounted
to $25,364 and $12,095 at November 30, 2004 and 2005,
respectively. Cash amounts held in foreign bank accounts
amounted to $2,560 and $1,845 at November 30, 2004 and 2005.
Restricted cash of $1,474 at November 30, 2005 represents
amounts held in escrow for the purchase of Audiovox Venezuela's
minority interest (Note 17). Restricted
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