Audiovox 2005 Annual Report Download - page 90

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The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred liabilities are
presented below:
NOVEMBER 30,
−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−
2004 2005
−−−−−−−−−−−−−−−− −−−−−−−−−−−−−−−
Deferred tax assets:
Accounts receivable, principally due to allowance for doubtful
accounts $1,398 $ 1,012
Inventory, principally due to additional costs capitalized for
tax purposes pursuant to the Tax Reform Act of 1986 464 687
Inventory, principally due to valuation reserve 3,431 8,104
Accrual for future warranty costs 2,174 2,063
Property, plant, equipment and certain intangibles,
principally due to depreciation and amortization 1,992 194
Net operating loss carryforwards, federal, state and foreign 914 2,117
Accrued liabilities not currently deductible and other 210 268
Unrealized gain on investment securities − (1,986)
Foreign tax credit − 2,308
Investment securities 825 434
Deferred compensation plans 1,903 2,401
−−−− −−−−−− −−−−−− −−−−−
Total gross deferred tax assets 13,311 17,602
Less: valuation allowance (218) (1,556)
−−−−− −−−−− −−− −−−−−−−
Net deferred tax assets $ 13,093 $ 16,046
========= ========
The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those
temporary differences become deductible.
At November 30, 2005, the Company incurred a net operating loss for
federal income tax purposes of approximately $22,259. A claim for
refund will be filed and this NOL will be carriedback two years and
fully utilized during this period.
A valuation allowance is provided when it is more likely than not that
some portion, or all, of the deferred tax assets will not be realized.
Based on the Company's ability to carry back future reversals of
deferred tax assets to taxes paid in current and prior years and the
Company's historical taxable income record, adjusted for unusual items,
management believes it is more likely than not that the Company will
realize the benefit of the net deferred tax assets existing at November
30, 2005. Further, management believes the existing net deductible
temporary differences will reverse during periods in which the Company
generates net taxable income. There can be no assurance, however, that
the Company will generate any earnings or any specific level of
continuing earnings in the future. The amount of the deferred tax asset
considered realizable by the Company, therefore, could be reduced in
the near term if estimates of future taxable income during the carry
forward period are reduced.
F−36