Audiovox 2008 Annual Report Download - page 71

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Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements, continued
February 29, 2008
(Dollars in thousands, except share and per share data)
n) Foreign Currency
Assets and liabilities of those subsidiaries and former equity investees located outside the United States whose cash
flows are primarily in local currencies have been translated at rates of exchange at the end of the period or historical
exchange rates, as appropriate in accordance with Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation" (“SFAS No. 52”). Revenues and expenses have been translated at the weighted-average rates of
exchange in effect during the period. Gains and losses resulting from translation are recorded in the cumulative foreign
currency translation account in accumulated other comprehensive income (loss). 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 Company
recorded foreign currency transaction losses (gains) in the amount of $(218), $(285), $43 and $(315), respectively.
Exchange gains and losses on inter-company balances of a long-term nature are also recorded in the cumulative foreign
currency translation account in accumulated other comprehensive income (loss).
o) Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled (see Note 8). The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Uncertain Tax Positions
The Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes –
an interpretation of FASB Statement No. 109, Accounting for Income Taxes” (“FIN No. 48”) which was effective for the
Company on March 1, 2007. FIN No. 48 addresses the determination of whether tax benefits claimed or expected to be
claimed on a tax return should be recorded in the financial statements. Under FIN No. 48, the Company may recognize
the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on
examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the
financial statements from such position should be measured based on the largest benefit that has a greater than fifty
percent likelihood of being realized upon ultimate settlement. FIN No. 48 also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods and disclosure requirements.
p) Income (Loss) Per Common Share
Basic income (loss) per common share is based upon the weighted-average number of common shares outstanding
during the period. Diluted income (loss) per common share reflects the potential dilution that would occur if securities or
other contracts to issue common stock were exercised or converted into common stock.
F-17
Source: AUDIOVOX CORP, 10-K, May 14, 2008