Audiovox 2010 Annual Report Download - page 63

Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements, continued
February 28, 2010
(Dollars in thousands, except share and per share data)
g) 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.
h) Accounts Receivable
The majority of the Company's accounts receivable are due from companies in the retail, mass merchant and OEM
industries. Credit is extended based on an evaluation of a customer's financial condition. Accounts receivable are
generally due within 30-60 days and are stated at amounts due from customers, net of an allowance for doubtful
accounts. Accounts outstanding longer than the contracted payment terms are considered past due.
Accounts receivable is comprised of the following:
February 28, February 28,
2010 2009
Trade accounts receivable and other $ 137,793 $ 112,456
Less:
Allowance for doubtful accounts 5,742 7,361
Allowance for cash discounts 785 199
$ 131,266 $ 104,896
The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history
and the customer's current credit worthiness, as determined by a review of their current credit information. The Company
continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses
based upon historical experience and any specific customer collection issues that have been identified. While such credit
losses have historically been within management's expectations and the provisions established, the Company cannot
guarantee it will continue to experience the same credit loss rates that have been experienced in the past. Since the
Company's accounts receivable are concentrated in a relatively few number of customers, a significant change in the
liquidity or financial position of any one of these customers could have a material adverse impact on the collectability of
the Company's accounts receivable and future operating results.
i) Inventory
The Company values its inventory at the lower of the actual cost to purchase (primarily on a weighted moving-average
basis) and/or the current estimated market value of the inventory less expected costs to sell the inventory. The Company
regularly reviews inventory quantities on-hand and records a provision for excess and obsolete inventory based primarily
from selling prices, indications from customers based upon current price negotiations and purchase orders. The
Company's industry is characterized by rapid technological change and frequent new product introductions that could
result in an increase in the amount of obsolete inventory quantities on-hand. The Company recorded inventory
write-downs of $2,972, $13,818 and $4,925 for the years ended February 28, 2010, February 28, 2009 and February 29,
2008, respectively.
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Source: AUDIOVOX CORP, 10-K, May 14, 2010 Powered by Morningstar® Document Research℠