Avnet 2003 Annual Report Download - page 57
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Please find page 57 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.AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of signiÑcant accounting policies:
Principles of consolidation Ì The accompanying consolidated Ñnancial statements include the accounts
of the Company and all of its subsidiaries. All intercompany accounts and transactions have been eliminated.
EÅective June 8, 2001, the Company acquired Kent Electronics Corporation (""Kent'') in a transaction
accounted for as a ""pooling-of-interests.'' Accordingly, the accompanying consolidated Ñnancial statements
and notes for periods prior to the acquisition have been restated to reÖect the acquisition of Kent (see Note 2).
Cash and cash equivalents Ì The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. At June 27, 2003, cash and cash equivalents include
$78,543,000 of cash restricted and held in an escrow account. This escrow balance consists of a portion of the
proceeds from the Company's issuance in February 2003 of $475,000,000 of 9
3
/
4
% Notes due February 15,
2008, which will be used to repay the remaining principal on the 6.45% Notes due August 15, 2003 and the
8.20% Notes due October 17, 2003 at their respective maturity dates plus interest due through their maturities
(see Note 7).
Inventories Ì Inventories, comprised principally of Ñnished goods, are stated at cost (Ñrst-in, Ñrst-out) or
market, whichever is lower.
Investments Ì Investments in joint ventures and entities in which the Company has an ownership
interest greater than 50% and exercises control over the venture are consolidated in the accompanying
consolidated Ñnancial statements. Minority interests in the years presented, which amounts are not material,
are included in the caption ""accrued expenses and other'' in the accompanying consolidated balance sheets.
The Company invests from time to time in ventures in which the Company's ownership interest is less than
20% and over which the Company does not exercise signiÑcant inÖuence. Such investments are accounted for
under the cost method. The fair values for investments not traded on a quoted exchange are estimated based
upon the performance of the ventures historically, the ventures' forecasted Ñnancial performance and
management's evaluation of the ventures' viability and business models. To the extent the book value of an
investment exceeds its assessed fair value, the Company will record an appropriate impairment charge (see
Note 17). Thus, the carrying value of the Company's investments approximates fair value.
Depreciation and amortization Ì Depreciation and amortization is generally provided for by the straight-
line method over the estimated useful lives of the assets. The estimated useful lives for depreciation and
amortization are typically as follows: buildings Ì 30 years; machinery, Ñxtures and equipment Ì 2-10 years;
and leasehold improvements Ì over the applicable remaining lease term or useful life if shorter. Internal use
software costs are expensed or capitalized depending upon the stage of the project, in accordance with the
AICPA's Statement of Position 98-1, ""Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use.'' Amortization of internal use software costs commences upon the project's
completion and extends over the estimated useful life, typically ranging from 5-7 years.
Long-lived assets Ì Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets 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 Ì 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 was amortized on a straight-line basis over 40 years through June 29, 2001. The Company has
adopted the Financial Accounting Standards Board's (""FASB'') Statement of Financial Accounting Stan-
dards No. 141 (""SFAS 141''), ""Business Combinations,'' which requires that all business combinations
initiated after June 30, 2001 be accounted for under the purchase method and that certain identiÑable
intangible assets be recognized as assets apart from goodwill. The Company has no other material identiÑable
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