Audiovox 2008 Annual Report Download - page 60

Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements
February 29, 2008
(Dollars in thousands, except share and per share data)
1) Description of Business and Summary of Significant Accounting Policies
a) Description of Business and Accounting Principles
Audiovox Corporation and subsidiaries (the “Company”) is a leading international distributor and value added service
provider in the mobile, consumer and accessory electronics industries. The Company designs and markets a diverse line
of electronic products under the Audiovox® and other brand names throughout the world. The Company has one
reportable segment, the Electronics Group, which is organized by product category. We conduct our business through
seven wholly-owned subsidiaries: American Radio Corp., Audiovox Accessories Corp. (“AAC”), Audiovox Consumer
Electronics, Inc., Audiovox Electronics Corporation ("AEC"), Audiovox German Holdings GmbH ("Audiovox
Germany"), Audiovox Venezuela, C.A and Code Systems, Inc. ("Code"). The Company completed the divestiture of
Audiovox Malaysia on November 7, 2005 (see Note 2). Unless specifically indicated otherwise, all amounts and
percentages presented in the notes below are exclusive of discontinued operations.
In February 2006, the Company changed its fiscal year end from November 30th to February 28th. The Company’s
current fiscal year began March 1, 2007 and ended on February 29, 2008. This annual report on Form 10-K supplements
the transition report on Form 10-Q for the three month transition period ended February 28, 2006 and compares the
financial position as of February 29, 2008 to February 28, 2007 and the results of operations for the years ended
February 29, 2008, February 28, 2007, the three months ended February 28, 2006 and the year ended November 30,
2005.
The financial statements and accompanying notes are prepared in accordance with accounting principles generally
accepted in the United States of America.
b) Principles of Consolidation
The consolidated financial statements include the financial statements of Audiovox Corporation and its wholly-owned
and majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in
consolidation.
Equity investments in which the Company exercises significant influence but does not control and is not the primary
beneficiary, as defined in FIN No. 46(R), are accounted for using the equity method. The Company's share of its equity
method investees earnings or losses are included in other income in the accompanying Consolidated Statements of
Operations. The Company eliminates its pro rata share of gross profit on sales to its equity method investees for
inventory on hand at the investee at the end of the year. Investments in which the Company is not able to exercise
significant influence over the investee are accounted for under the cost method.
c) Use of Estimates
The preparation of these financial statements require the Company to make estimates and assumptions that affect
reported amounts of assets, liabilities, revenue and expenses. Such estimates include the allowance for doubtful
accounts, inventory valuation, recoverability of deferred tax assets, reserve for uncertain tax positions, valuation of
long-lived assets, accrued sales incentives, warranty reserves, stock-based compensation and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements. Actual results could differ from those estimates.
F-8
Source: AUDIOVOX CORP, 10-K, May 14, 2008