Audiovox 2006 Annual Report Download - page 64

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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)
During the year ended November 30, 2005, $1,758 of unrealized losses on available for sale
investment securities were transferred into earnings as a result of an other than temporary
impairment charge. The currency translation adjustments are not adjusted for income taxes
as they relate to indefinite investments in non-U.S. subsidiaries and equity investments.
v) New Accounting Pronouncements
In July 2006, the Financial Accounting Standards Board issued FASB Interpretation
No. 48. ‘‘Accounting for Uncertainty in Income Taxes’’ (‘‘FIN 48’’). FIN 48 clarifies the
accounting for uncertain income tax positions that are recognized in the Company’s
financial statements in accordance with the provisions of FASB Statement No. 109,
‘‘Accounting for Income Taxes’’. FIN 48 also provides guidance on the derecognition of
uncertain positions, financial statement classification, accounting for interest and penalties,
accounting for interim periods and adds new disclosure requirements. FIN 48 is effective
for fiscal years beginning after December 15, 2006. The Company is currently evaluating
the impact that FIN 48 will have on its financial position and results of operations.
In September 2006, the Securities and Exchange Commission (‘‘SEC’’) issued Staff
Accounting Bulletin No. 108, ‘‘Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements’’ (‘‘SAB 108’’). SAB 108
requires registrants to use both a balance sheet approach and an income statement
approach when evaluating and quantifying the materiality of a misstatement. SAB 108
provides guidance on correcting errors under the dual approach as well as providing
transition guidance for correcting errors. The Company adopted the provisions of SAB 108
as of February 28, 2007. The adoption of SAB 108 did not have a material impact on our
financial position or results of operations.
In September 2006, the FASB issued SFAS No. 157, ‘‘Fair Value Measurements’’ (‘‘SFAS
157’’). SFAS 157 defines fair value, establishes guidelines for measuring fair value and
expands disclosures regarding fair value measurement. SFAS 157 does not require any new
fair value measurements, but 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.
w) Reclassifications
Certain reclassifications have been made to the consolidated financial statements in order
to conform to the current presentation.
x) Allocating Interest Expense to Discontinued Operations
Interest expense of $3,148 was allocated to discontinued operations for the year ended
November 30, 2004. This allocation represented consolidated interest that could not be
attributed to other operations of the Company and such allocations were based on the
required working capital needs of the Cellular business (Note 2).
y) Issuances of Subsidiary Stock
The Company’s accounting policy on the issuances of subsidiary stock is to recognize
through earnings the gain on the sale of the shares as long as the sale of the shares is not
part of a broader corporate reorganization planned or contemplated by the Company and
realization of the gain is assured.
z) Tax interest and penalties
The Company classifies interest and penalties associated with income taxes as a component
of income tax expense (benefit) on the consolidated statement of operations.
F-24