Audiovox 2006 Annual Report Download - page 108

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Audiovox Specialized Applications, LLC and Subsidiary
(A Limited Liability Company)
Notes to Financial Statements
The amount classified as current assets on the accompanying balance sheets represents the
amount of marketable debt securities expected to be sold during the next year.
A decline in the market value of any available-for-sale security below cost that is deemed
other-than-temporary results in a reduction in carrying amount to fair value. The impairment is
charged to earnings and a new cost basis for the security is established. The Company considers
numerous factors, on a case by case basis, in evaluating whether the decline in market value of an
available-for-sale security below cost is other-than-temporary. Such factors include, but are not limited
to, (i) the length of time and the extent to which the market value has been less than cost; (ii) the
financial condition and the near-term prospects of the issuer or the investment; and (iii) whether the
Company’s intent to retain the investment for the period of time is sufficient to allow for any
anticipated recovery in market value.
Trade receivables:
Trade receivables are carried at original invoice amount less an estimate made for doubtful
receivables based on a review of all outstanding amounts on a monthly basis. Trade receivables in the
accompanying balance sheets at November 30, 2006 and 2005 are stated net of an allowance for
doubtful accounts of approximately $50,000 and $76,000 respectively. Management determines the
allowance for doubtful accounts by identifying troubled accounts and by using historical experience
applied to an aging of accounts. Trade receivables are written off when deemed uncollectible.
Recoveries of trade receivables previously written off are recorded when received. Generally, a trade
receivable is considered to be past due if any portion of the receivable balance is outstanding for
more than 30 days.
Inventories:
The Company values its inventory at the lower of the actual cost to purchase (primarily on a
weighted moving average basis) and/or the current estimated market value of the inventory less
expected costs to sell the inventory. The Company regularly reviews inventory quantities on-hand and
records a provision for excess and obsolete inventory based primarily from selling prices, indications
from customers based upon current price negotiations and purchase orders. The Company’s industry is
characterized by rapid technological change and frequent new product introductions that could result
in an increase in the amount of obsolete inventory quantities on-hand.
Depreciation:
Depreciation of leasehold improvements is computed over the lesser of the underlying lease term
or the estimated useful lives and equipment is computed principally by the straight-line method over
the following estimated useful lives:
Years
Leasehold improvements ................ 5
Machinery and equipment ............... 5-10
Tooling and molding .................... 3
Transportation equipment ............... 5
Office furniture and fixtures.............. 10
Computer equipment.................... 3-5
Booth displays ......................... 7
Warranties:
The Company provides a limited warranty primarily for a period of up to three years for its
products. The Company’s standard warranties require the Company, the original equipment
8