Audiovox 2006 Annual Report Download - page 34

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rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS
157 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the
impact of SFAS 157, but we do not expect the adoption of this pronouncement will have a material
impact on our financial position or results of operations.
Item 7a — Quantitative and Qualitative Disclosures About Market Risk
The market risk inherent in our market instruments and positions is the potential loss arising
from adverse changes in marketable equity security prices, interest rates and foreign currency
exchange rates.
Marketable Securities
Marketable securities at February 28, 2007, which are recorded at fair value of $13,179, include an
unrealized loss of $1,561, and have exposure to price risk. This risk is estimated as the potential loss in
fair value resulting from a hypothetical 10%adverse change in prices quoted by stock exchanges and
amounts to $1,318 as of February 28, 2007. Actual results may differ.
Interest Rate Risk
Our earnings and cash flows are subject to fluctuations due to changes in interest rates on
investment of available cash balances in money market funds and investment grade corporate and
U.S. government securities. Under our current policies, we do not use interest rate derivative
instruments to manage exposure to interest rate changes. In addition, our bank loans expose us to
changes in short-term interest rates since interest rates on the underlying obligations are either
variable or fixed.
Foreign Exchange Risk
We are subject to risk from changes in foreign exchange rates for our subsidiaries and marketable
securities that use a foreign currency as their functional currency and are translated into U.S. dollars.
These changes result in cumulative translation adjustments, which are included in accumulated other
comprehensive loss. At February 28, 2007, we had translation exposure to various foreign currencies
with the most significant being the Euro, Thailand Baht, Malaysian Ringgit, Hong Kong Dollar and
Canadian Dollar. The potential loss resulting from a hypothetical 10%adverse change in quoted
foreign currency exchange rates, as of February 28, 2007 amounts to $2,240. Actual results may differ.
Item 8 — Consolidated Financial Statements and Supplementary Data
The information required by this item appears beginning on page F-1 of this Annual Report on
Form 10-K and is incorporated herein by reference.
Item 9 — Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not Applicable
Item 9a — Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Audiovox Corporation and subsidiaries (the ‘‘Company’’) maintains disclosure controls and
procedures that are designed to ensure that information required to be disclosed in the reports that
the Company files or submits under the Securities and Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in accordance with the SEC’s rules and
regulations, and that such information is accumulated and communicated to the Company’s
management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding required financial disclosures.
33