Audiovox 2010 Annual Report Download - page 73

Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements, continued
February 28, 2010
(Dollars in thousands, except share and per share data)
Effective January 1, 2010, according to the guidelines in ASC 830, Venezuela has been designated as a
hyper-inflationary economy. A hyper-inflationary economy designation occurs when a country has experienced
cumulative inflation of approximately 100 percent or more over a 3 year period. The hyper-inflationary designation
requires the local subsidiary in Venezuela to record all transactions as if they were denominated in U.S. dollars. The
Company will transition to hyper-inflationary accounting on March 1, 2010.
p) 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 Company adopted guidance included in ASC 740 “Income Taxes” (“ASC 740”) as it relates to uncertain tax
positions. The guidance 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 ASC 740, 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. ASC 740 also provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods and disclosure requirements.
Tax interest and penalties
The Company classifies interest and penalties associated with income taxes as a component of income tax expense
(benefit) on the consolidated statement of operations.
q) 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.
A reconciliation between the denominators of the basic and diluted income (loss) per common share are as follows:
Year Year Year
Ended Ended Ended
February 28, February 28, February 29,
2010 2009 2008
Weighted-average number of common shares outstanding (basic) 22,875,651 22,860,402 22,853,482
Effect of dilutive securities:
Stock options and stock warrants 44,014 - 22,680
Weighted-average number of common and potential common shares
outstanding (diluted) 22,919,665 22,860,402 22,876,162
Stock options and stock warrants totaling 1,221,200, 1,544,225 and 1,336,787 for the years ended February 28, 2010,
February 28, 2009 and February 29, 2008, respectively, were not included in the net income (loss) per common share
calculation because the exercise price of these options and warrants were greater than the average market price of
common stock during the period or these options and warrants were anti-dilutive due to losses during the respective
periods.
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Source: AUDIOVOX CORP, 10-K, May 14, 2010 Powered by Morningstar® Document Research℠