Audiovox 2008 Annual Report Download - page 68

Download and view the complete annual report

Please find page 68 of the 2008 Audiovox annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 130

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130

Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements, continued
February 29, 2008
(Dollars in thousands, except share and per share data)
Market development funds are offered to customers in connection with new product launches or entrance into new
markets. The amount offered for new product launches is based upon a fixed amount, or percentage of sales revenue to
the customer or a fixed amount per unit sold to the customer during a specified time period.
Volume incentive rebates offered to customers require that minimum quantities of product be purchased during a
specified period of time. The amount offered is either based upon a fixed percentage of sales revenue to the customer or
a fixed amount per unit sold to the customer. The Company makes an estimate of the ultimate amount of the rebate their
customers will earn based upon past history with the customer and other facts and circumstances. The Company has the
ability to estimate these volume incentive rebates, as there does not exist a relatively long period of time for a particular
rebate to be claimed. Any changes in the estimated amount of volume incentive rebates are recognized immediately
using a cumulative catch-up adjustment. The Company accrues the cost of co-operative advertising allowances, volume
incentive rebates and market development funds at the later of when the customer purchases our products or when the
sales incentive is offered to the customer.
Other trade allowances are additional sales incentives that the Company provides to customers subsequent to the related
revenue being recognized. In accordance with EITF 01-9, the Company records the provision for these additional sales
incentives at the later of when the sales incentive is offered or when the related revenue is recognized. Such additional
sales incentives are based upon a fixed percentage of the selling price to the customer, a fixed amount per unit, or a
lump-sum amount.
The accrual balance for sales incentives at February 29, 2008 and February 28, 2007 was $10,768 and $7,410,
respectively. Although the Company makes its best estimate of its sales incentive liability, many factors, including
significant unanticipated changes in the purchasing volume of its customers and the lack of claims made by customers
could have a significant impact on the sales incentives liability and reported operating results.
For the years ended February 29, 2008, February 28, 2007, the three months ended February 28, 2006 and the year ended
November 30, 2005, reversals of previously established sales incentive liabilities amounted to $4,108, $2,460, $480 and
$2,836, respectively. These reversals include unearned and unclaimed sales incentives. Reversals of unearned sales
incentives are volume incentive rebates where the customer did not purchase the required minimum quantities of product
during the specified time. Volume incentive rebates are reversed into income in the period when the customer did not
reach the required minimum purchases of product during the specified time. Unearned sales incentives for the years
ended February 29, 2008, February 28, 2007, the three months ended February 28, 2006 and the year ended November
30, 2005 amounted to $1,970, $1,148, $0 and $1,007, respectively. Unclaimed sales incentives are sales incentives
earned by the customer but the customer has not claimed payment from the Company within the claim period (period
after program has ended). Unclaimed sales incentives for the years ended February 29, 2008, February 28, 2007, the
three months ended February 28, 2006 and the year ended November 30, 2005 amounted to $2,138, $1,312, $480 and
$1,829, respectively.
The Company reverses earned but unclaimed sales incentives based upon the expiration of the claim period of each
program. Unclaimed sales incentives that have no specified claim period are reversed in the quarter following one year
from the end of the program. The Company believes the reversal of earned but unclaimed sales incentives upon the
expiration of the claim period is a disciplined, rational, consistent and systematic method of reversing unclaimed sales
incentives.
F-15
Source: AUDIOVOX CORP, 10-K, May 14, 2008