Audiovox 2010 Annual Report Download - page 124

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Audiovox Specialized Applications, LLC And Subsidiary
(A Limited Liability Company)
Notes To Financial Statements
Depreciation:
Depreciation of leasehold improvements is computed over the lesser of the underlying lease term or the estimated useful lives and
equipment is computed principally by the straight-line method over the following estimated useful lives:
Years
Leasehold improvements 5-9
Machinery and equipment 5-10
Tooling and molding 3
Transportation equipment 5
Office furniture and fixtures 10
Computer equipment 3-5
Booth displays 7
Warranties:
The Company provides a limited warranty primarily for a period of up to three years for its products. The Company’s standard
warranties require the Company, the original equipment manufacturer or its dealers to repair or replace defective products during such
warranty periods at no cost to the consumer. The Company estimates the costs that may be incurred under its basic limited warranty
and records a liability in the amount of such costs at the time product revenue is recognized. The related expense is recorded as cost
of goods sold in the accompanying statements of income. Factors that affect the Company’s warranty liability include the number of
units sold, historical and anticipated rates of warranty claims, the historical lag time between product sales and product claims, and
cost per claim. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as
necessary. The Company utilizes historical trends and analytical tools to assist in determining the appropriate loss reserve levels.
Changes in the Company’s warranty liability during the years ended November 30, 2009, 2008, and 2007 are as follows:
2009 2008 2007
Balance, beginning $ 2,647,000 $ 2,457,000 $ 2,307,000
Accruals for products sold 854,016 2,032,340 2,497,155
Payments made (1,172,016) (1,842,340) (2,347,155)
Balance, ending $ 2,329,000 $ 2,647,000 $ 2,457,000
Income taxes:
As a limited liability Company, the Company’s taxable income is allocated to members in accordance with their respective percentage
ownership. Therefore, no provision or liability for income taxes has been included in the financial statements.
Advertising costs:
The Company expenses the cost of advertising (including trade shows), as incurred. Advertising costs in the accompanying
statements of income were approximately $266,000, $459,000, and $629,000, for the years ended November 30, 2009, 2008, and 2007
respectively.
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Source: AUDIOVOX CORP, 10-K, May 14, 2010 Powered by Morningstar® Document Research℠