Avnet 2003 Annual Report Download - page 28
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Please find page 28 of the 2003 Avnet annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Recently Issued Accounting Pronouncements
In November 2002, the Emerging Issues Task Force reached a consensus on EITF Issue No. 02-16
(""EITF 02-16''), ""Accounting by a Customer (Including a Reseller) for Certain Consideration Received
from a Vendor.'' EITF 02-16 provides guidance as to the classiÑcation and timing of recognition of supplier
rebates in the results of operations of the customer or reseller receiving the rebate. Substantially all of Avnet's
rebates are dependent on the resale of the product to Avnet's customers and the rebates are typically not
awarded until Avnet completes this sale. Avnet has historically accounted for these rebates as a reduction of
cost of sales and, therefore, EITF 02-16 did not have a material impact on the Company.
In January 2003, the FASB issued FASB Interpretation No. 46 (""FIN 46''), ""Consolidation of Variable
Interest Entities,'' which requires the consolidation of variable interest entities (""VIEs''), as deÑned, based
upon an assessment of a company's investment interests in the VIE as it relates to the interests of other
investors in the VIE. FIN 46 also includes certain disclosure requirements related to any VIEs. The
consolidation requirements apply to any VIEs created after January 31, 2003 and, for any VIEs that existed
prior to that date, the consolidation requirements are eÅective with Avnet's Ñrst quarter of Ñscal 2004 to the
extent Avnet continues to hold an investment interest in any such VIEs as of the Ñrst day of that quarter. The
adoption of FIN 46 is not expected to have a material impact on the Company's consolidated Ñnancial
statements.
In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149 (""SFAS 149''),
""Amendment of Statement 133 on Derivative Instruments and Hedging Activities,'' which amends and
clariÑes Ñnancial accounting and reporting for derivative instruments, including certain derivative instruments
embedded in other contracts. SFAS 149 is eÅective for contracts entered into or modiÑed after June 30, 2003
and for hedging relationships designated after June 30, 2003. The provisions of SFAS 149 are to be applied
prospectively and, therefore, will have no impact on pre-existing hedging transactions.
In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150 (""SFAS 150''),
""Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.''
SFAS 150 establishes standards for classiÑcation and measurement of certain Ñnancial instruments.
SFAS 150 is eÅective for any Ñnancial instruments entered into or modiÑed after May 31, 2003 and Avnet
adopted SFAS 150, as required, for any previously existing Ñnancial instruments as of June 28, 2003. The
adoption of SFAS 150 did not have a material eÅect on the Company's consolidated Ñnancial statements.
Acquisitions and Investments
For an overview of the Company's acquisitions over the past three years, see Item 1, ""Business,'' and see
Note 2 to the consolidated Ñnancial statements appearing in Item 15 of this Report. Management currently
does not anticipate making any material acquisitions in the near term.
See Note 2 to the consolidated Ñnancial statements for further discussion of the impact of certain
material acquisitions on the Ñnancial results of the Company.
Results from Operations
The results for 2003 reÖect a relatively stable but continuing weak technology market as the electronic
components and computer products industry, and the global economy in general, continue to try to recover
from the downturn that commenced after the Company's second quarter of 2001. This downturn has had a
signiÑcant impact on the Company's results from operations in all periods presented herein. The downturn is
primarily a consequence of several economic and geopolitical forces: weakened Ñnancial markets following the
collapse of the dot com industry and other recent signiÑcant business failures; weak global demand for IT
capital equipment following the Y2K and dot com infrastructure buildup; a severe oversupply of electronic
components; and an uncertain geopolitical climate. These events have impacted, to varying degrees, all facets
of the technology markets in which the Company competes, resulting in suppressed demand which has been
compounded by pricing pressures within the supply chain, a common eÅect to the industry in a downturn such
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