Audiovox 2008 Annual Report Download - page 41

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Recent Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 defines fair
value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurement. SFAS No. 157 does
not require any new fair value measurements, but rather eliminates inconsistencies in guidance found in other accounting
pronouncements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2008, as it was amended by FASB Staff
Position No. 157-b, Effective Date of FASB Statement No. 157. The transition adjustment of the difference between the carrying
amounts and the fair values of those financial instruments should be recognized as a cumulative effect adjustment to retained earnings
as of the beginning of the year of adoption. The Company is currently evaluating the impact of SFAS No. 157, but does not expect the
adoption of this pronouncement to have a material impact on the Company’s financial position or results of operations.
In February 2007, the FASB released SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”
(“SFAS No. 159”) to provide companies with an option to report selected financial assets and liabilities at fair value. The objective of
SFAS No. 159 is to reduce both the complexity in accounting for financial instruments and the volatility in earnings caused by
measuring related assets and liabilities differently. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007 with
early adoption permitted. The Company is currently evaluating the impact of SFAS No. 159, but does not expect the adoption of this
pronouncement to have a material impact on the Company’s financial position or results of operations.
On December 4, 2007, the Financial Accounting Standards Board (“FASB”) issued Statement No. 141(R), Business Combinations
(“Statement No. 141(R)”) and Statement No. 160, Accounting and Reporting of Noncontrolling Interests in Consolidated Financial
Statements, an amendment of ARB No. 51 (“Statement No. 160”). These new standards will significantly change the financial
accounting and reporting of business combination transactions and noncontrolling (or minority) interests in consolidated financial
statements. Issuance of these standards is also noteworthy in that they represent the culmination of the first major collaborative
convergence project between the International Accounting Standards Board and the FASB. Statement No. 141(R) is required to be
adopted concurrently with Statement No. 160 and is effective for business combination transactions for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Early adoption is prohibited.
Application of Statement No. 141(R) and Statement No. 160 is required to be adopted prospectively, except for certain provisions of
Statement No. 160, which are required to be adopted retrospectively. Business combination transactions accounted for before adoption
of Statement No. 141(R) should be accounted for in accordance with Statement No. 141 and that accounting previously completed
under Statement No. 141 should not be modified as of or after the date of adoption of Statement No. 141(R). The Company is
currently evaluating the impact of Statement No. 141(R) and Statement No. 160, but does not expect the adoption of these
pronouncements to have a material impact on the Company’s 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 29, 2008, which are recorded at fair value of $15,033, include an unrealized gain of $377 and
have exposure to price fluctuations. 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 $1,503 as of February 29, 2008. 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.
37
Source: AUDIOVOX CORP, 10-K, May 14, 2008