Audiovox 2008 Annual Report Download - page 62

Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements, continued
February 29, 2008
(Dollars in thousands, except share and per share data)
Long-term investment securities consist of taxable auction rate notes which have long-term maturity dates (October
2038) and are classified as available-for-sale at February 29, 2008.
During fiscal 2007, short-term investment securities consisted of tax-exempt auction rate notes, which are available for
sale one year or less when purchased. The Company's overall goal for short-term investments is to invest primarily in
low risk, fixed income securities with the intention of maintaining principal while generating a moderate return. In
accordance with the Company's investment policy, all long and short-term investment securities are invested in
"investment grade" rated securities and all investments have an Aaa or better rating at February 29, 2008. Trading
securities consist of mutual funds, which are held in connection with the Company’s deferred compensation plan.
Deferred tax (liabilities) assets of $(488) and $1,009 related to available-for-sale securities were recorded at February 29,
2008 and February 28, 2007, respectively, as a reduction to the unrealized holding gain (loss) included in accumulated
other comprehensive income (loss).
During the year ended November 30, 2005, the Company recorded an-other-than temporary impairment charge of $1,758
for its investment in CellStar common stock and such charge has been included in other income (expense) on the
accompanying Consolidated Statement of Operations. The Company recorded this charge as a result of the inability of
the investment to regain its marketability, stock listing and the unlikelihood that the cost of this investment would be
recovered due to the extended decline in stock price. A decline in the market value of any available-for-sale security
below cost that is deemed other-than-temporary results in a reduction in carrying amount to fair value. The impairment is
charged to earnings and a new cost basis for the security is established. The Company considers numerous factors, on a
case-by-case basis, in evaluating whether the decline in market value of an available-for-sale security below cost is
other-than-temporary. Such factors include, but are not limited to, (i) the length of time and the extent to which the
market value has been less than cost; (ii) the financial condition and the near-term prospects of the issuer of the
investment; and (iii) whether the Company's intent to retain the investment for the period of time is sufficient to allow
for any anticipated recovery in market value.
f) Revenue Recognition
The Company recognizes revenue from product sales at the time of passage of title and risk of loss to the customer either
at FOB shipping point or FOB destination, based upon terms established with the customer. The Company's selling price
to its customers is a fixed amount that is not subject to refund or adjustment or contingent upon additional rebates. Any
customer acceptance provisions, which are related to product testing, are satisfied prior to revenue recognition. There are
no further obligations on the part of the Company subsequent to revenue recognition except for product returns from the
Company's customers. The Company does accept product returns, if properly requested, authorized, and approved by the
Company. The Company records an estimate of product returns by its customers and records the provision for the
estimated amount of such future returns at point of sale, based on historical experience and any notification the Company
receives of pending returns.
The Company includes all costs incurred for shipping and handling as cost of sales and all amounts billed to customers
as revenue.
F-10
Source: AUDIOVOX CORP, 10-K, May 14, 2008