Avnet 2001 Annual Report Download - page 45

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1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Principles of consolidation — The accompanying consolidated
financial statements include the accounts of the Company and all
of its subsidiaries. All intercompany accounts and transactions have
been eliminated. Minority interests at the end of 2001 and 2000,
which amounts are not material, are included in the caption
“Accrued expenses and other.”
Effective June 8, 2001, the Company acquired Kent Electronics
Corporation (“Kent”) in a transaction accounted for as a “pooling-
of-interests.” Accordingly, the accompanying consolidated financial
statements and notes for periods prior to the acquisition have been
restated to reflect the acquisition of Kent (see Note 2).
Cash equivalents — The Company considers all highly liquid
investments with an original maturity of three months or less to be
cash equivalents.
Inventories — Inventories are stated at cost (first-in, first-out) or
market, whichever is lower.
Depreciation and amortization — Depreciation and amortization
is generally provided for by the straight-line method over the
estimated useful lives of the assets.
Long-lived assets — Long-lived assets are reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount of the assets in question may not be recoverable.
The Company continually evaluates the carrying value and the
remaining economic useful life of all long-lived assets and
will adjust the carrying value and the related depreciation and
amortization period if and when appropriate.
Goodwill — Goodwill represents the excess of the purchase price
over the fair value of net assets acquired. Except for an immaterial
amount of goodwill applicable to purchases made before
October 31, 1970, goodwill is being amortized on a straight-line
basis over 40 years.
Foreign currency translation — The assets and liabilities of foreign
operations are translated into U.S. dollars at the exchange rates in
effect at the balance sheet date with the related translation gains
and losses reported as a separate component of shareholders’ equity
and comprehensive income. Results of operations are translated
using the average exchange rates prevailing throughout the period.
Income taxes — No provision for U.S. income taxes has been made
for approximately $163,000,000 of cumulative unremitted earnings
of foreign subsidiaries at June 29, 2001 because those earnings are
expected to be permanently reinvested outside the U.S. If such
earnings were remitted to the U.S., any net U.S. income taxes would
not have a material impact on the financial position or results of
operations of the Company.
Stock split — On August 31, 2000, the Board of Directors of Avnet,
Inc. declared a two-for-one stock split to be effected in the form of
a stock dividend. The additional common stock was distributed on
September 28, 2000 to shareholders of record on September 18, 2000.
All references in this report to the number of shares, per share
amounts and market prices of the Company’s common stock have
been restated to reflect the stock split and the resulting increased
number of shares outstanding.
Revenue Recognition — Revenue from product sales is recognized
upon shipment to customers. Revenues and anticipated profits
under long-term contracts are recorded on the percentage of
completion basis, under which a portion of the total contract price
is accrued based on the ratio of costs incurred to estimated costs at
completion. Revenues from maintenance contracts are recognized
ratably over the life of the contracts, ranging from one to three years.
Shipping and handling fees and costs — The Company recognizes
amounts billed to a customer in a sale transaction related to shipping
and handling as revenue. The costs incurred by the Company for
shipping and handling are classified as cost of sales.
Concentration of credit risk — Financial instruments which
potentially subject the Company to a concentration of credit risk
principally consist of cash and cash equivalents and trade accounts
receivable. The Company invests its excess cash primarily in overnight
Eurodollar time deposits and institutional money market funds
with quality financial institutions. The Company sells electronic
components and computer products primarily to original equip-
ment manufacturers, including military contractors and the military,
Avnet, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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