Audiovox 2009 Annual Report Download - page 85

Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements
February 28, 2009
(Dollars in thousands, except share and per share data)
In April 2009, the FASB issued FASB Staff Position 157-4, “Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased in Identifying Transactions That Are Not Orderly”
(“FSP 157-4”). FSP 157-4 provides guidance in determining fair value when the volume and level of activity for the
asset or liability have significantly decreased and on identifying transactions that are not orderly. This FSP shall be
effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Early
adoption is permitted for periods ending after March 15, 2009. The adoption of FSP 157-4 is not expected to have a
significant impact on the Company’s financial position, results of operations or the determination of the fair value of its
financial assets.
In April 2009, the FASB issued FASB Staff Position FAS 115-2 and FAS 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairment” (“FSP 115-2/124-2”). FSP 115-2/124-2 amends the requirements for the
recognition and measurement of other-than-temporary impairments for debt securities by modifying the pre-existing
“intent and ability” indicator. Under FSP 115-2/124-2, an other-than-temporary impairment is triggered when there is
intent to sell the security, it is more likely than not that the security will be required to be sold before recovery, or the
security is not expected to recover the entire amortized cost basis of the security. Additionally, FSP 115-2/124-2 changes
the presentation of an other-than-temporary impairment in the income statement for those impairments involving credit
losses. The credit loss component will be recognized in earnings and the remainder of the impairment will be recorded in
other comprehensive income. FSP 115-2/124-2 is effective for the Company beginning in the first quarter of fiscal year
2010. Upon implementation at the beginning of the first quarter of 2010, FSP 115-2/124-2 is not expected to have a
significant impact on the Company’s financial position or results of operations.
On April 9, 2009, the FASB issued FASB Staff Position 107-1 and APB 28-1, “Interim Disclosures about Fair Value of
Financial Instruments” (“FSP 107-1 and APB 28-1”). FSP 107-1 and APB 28-1 which will amend SFAS No. 107,
“Disclosures about Fair Value of Financial Instruments” (“FAS 107”). FSP 107-1 and APB 28-1 will require an entity to
provide disclosures about the fair value of financial instruments in interim financial information. FSP 107-1 and APB
28-1 would apply to all financial instruments within the scope of SFAS No. 107 and will require entities to disclose the
method(s) and significant assumptions used to estimate the fair value of financial instruments, in both interim financial
statements as well as annual financial statements. FSP 107-1 and APB 28-1 will be effective for interim and annual
periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. An entity
may early adopt FSP 107-1 and APB 28-1 only if it also elects to early adopt FSP 157-4 and FSP 115-2 and 124-2. Since
FSP 107-1 and APB-28-1 will require disclosures about fair values in interim periods, the adoption of FSP FAS 107-1
and APB 28-1 is not expected to have a significant impact on the Company’s financial position or results of operations.
2) Discontinued Operations
The Company had net income (loss) from discontinued operations of $1,719 and ($756) for the years ended February 29,
2008 and February 28, 2007, respectively, which is primarily due to legal settlements and related legal and administrative
costs associated with contingencies pertaining to the Company’s discontinued Cellular (see Note 15) and Malaysia
businesses.
Included in income from discontinued operations are tax provisions (benefits) of $1,529 and $(407) for the years ended
February 29, 2008 and February 28, 2007, respectively.
3) Business Acquisitions
Thomson Accessories
On January 29, 2007, the Company acquired certain assets and liabilities of Thomson’s Americas consumer electronics
accessory business as well as rights to the RCA, Recoton, Spikemaster, Ambico and Discwasher brands for consumer
electronics accessories for $64,716, including a working capital payment of $7,617, acquisition costs of $2,414 and a fee
currently estimated to be approximately $4,685 related to 0.75% of future net sales of the RCA brand for five years from the
date of acquisition. The fee related to the future net sales of the RCA brand was recorded in connection with the final
purchase price allocation (increase to intangible assets, other current liabilities ($890) and other long-term liabilities) as the
estimated fair value of the net assets acquired exceeded the total purchase price. As the estimated fair value of the net assets
acquired exceeded the total purchase price, after recording the estimated fee related to future net sales of the RCA brand, the
Company reduced the estimated fair value of the non-financial assets acquired on a prorata basis to the adjusted purchase
price of $64,716.
The results of operations of this acquisition have been included in the consolidated financial statements from the date of
acquisition. The purpose of this acquisition was to enhance the Company’s market share in the accessory business, which
Source: AUDIOVOX CORP, 10-K, May 14, 2009 Powered by Morningstar® Document Research℠