Audiovox 2006 Annual Report Download - page 55

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Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements, continued
February 28, 2007
(Dollars in thousands, except share and per-share data)
February 28, 2006 and the years ended November 30, 2005 and 2004, respectively. Included
in depreciation and amortization expense is amortization of computer software costs of
$334, $65, $179 and $149 for the year ended February 28, 2007, the three months ended
February 28, 2006 and the years ended November 30, 2005 and 2004, respectively. Included
in depreciation expense is $240 of depreciation related to property under capital lease for
the years ended February 28, 2007, November 30, 2005 and 2004, and $60 for the three
months ended February 28, 2006.
Accumulated depreciation and amortization includes $2,138 and $1,898 related to property
under capital lease at February 28, 2007 and 2006, respectively. Computer software includes
approximately $1,240 and $353 of unamortized costs as of February 28, 2007 and 2006,
respectively, related to the acquisition and installation of management information systems
for internal use.
k) Goodwill and Other Intangible Assets
Goodwill and other intangible assets consist of the excess over the fair value of assets
acquired (goodwill) and other intangible assets (patents, contracts and
trademarks/tradenames).
Statement of Financial Accounting Standards (‘‘SFAS’’) No. 142 ‘‘Goodwill and Other
Intangible Assets’’ requires that goodwill and intangible assets with indefinite useful lives
be tested for impairment at least annually or more frequently if an event occurs or
circumstances change that could more likely than not reduce the fair value of a reporting
unit below its carrying amount. Equity method goodwill, which amounted to $4,602 at
February 28, 2007 and 2006, is evaluated for impairment under Accounting Principles
Board No. 18, ‘‘The Equity Method of Accounting for Investments in Common Stock’’, as
amended. SFAS No. 142 also requires that intangible assets with estimable useful lives be
amortized over their respective estimated useful lives and reviewed for impairment in
accordance with SFAS No. 144, ‘‘Accounting for the Impairment or Disposal of Long-Lived
Assets’’.
For intangible assets with indefinite lives, including goodwill, the Company performed its
annual impairment test, as of the end of the fiscal fourth quarter, which indicated no
reduction is required. The cost of other intangible assets with definite lives are amortized
on a straight-line basis over their respective lives.
Goodwill
The change in carrying amount of goodwill is as follows:
February 28,
2007 2006
Net beginning balance (March 1st).......................... $16,067 $17,818
Terk acquisition purchase price adjustment .................. — (2,001)
Purchase of minority interest (Note 17)...................... 1,447 250
Net ending balance (February 28th)......................... $17,514 $16,067
F-15