Audiovox 2006 Annual Report Download - page 106

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Audiovox Specialized Applications, LLC and Subsidiary
(A Limited Liability Company)
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 in certain niche markets in 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, Speakers and Housings
and other Audio/Video Products; and Heavy Duty Systems, Radios and other Audio Products. These
products are sold to customers throughout the world, generally on 30-day terms. ASA is
headquartered in Elkhart, Indiana and has a public distribution center in 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:
Principles of Consolidation:
The consolidated financial statements include the accounts of the Company and CruiseTV, LLC
(‘‘CruiseTV’’) a wholly-owned subsidiary. All significant intercompany accounts have been eliminated
in consolidation.
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 selling price is fixed and determined at the time of
shipment and collectibility is reasonably assured and not contingent upon the customer’s resale of the
product. The customers are generally not given rights of return. In the event customers are granted
rights of return, the Company estimates and records an allowance for future returns. At
November 30, 2006 and 2005, no such allowance was deemed necessary. The product sale is not
subject to acceptance or installation by Company or customer personnel.
The Company recognizes shipping costs in selling, general and administrative in the
accompanying statements of income. Shipping costs for the years ended November 30, 2006, 2005, and
2004 were approximately $518,000, $403,000, and $387,000, respectively.
The Company recognizes royalty revenue at the time the related product is purchased by
Audiovox Corporation (‘‘Audiovox’’), a member of ASA. Total royalty revenue under this agreement
for the years ended November 30, 2006, 2005, and 2004 was approximately $649,000, $871,000, and
$2,103,000, respectively.
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