Avnet 2003 Annual Report Download - page 58
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Please find page 58 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 Ì Continued
intangible assets besides goodwill. The Company also elected to early adopt the provisions of the FASB's
Statement of Financial Accounting Standards No. 142 (""SFAS 142''), ""Goodwill and Other Intangible
Assets,'' eÅective June 30, 2001, the Ñrst day of the Company's Ñscal year 2002. SFAS 142 requires that
ratable amortization of goodwill be replaced with periodic tests for goodwill impairment (see Note 6). The
Company conducts its periodic test for goodwill impairment annually, on the Ñrst day of the Ñscal fourth
quarter.
Foreign currency translation Ì The assets and liabilities of foreign operations are translated into U.S.
dollars at the exchange rates in eÅect 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. Transactions denominated in
currencies other than the functional currency of the Avnet business unit that is party to the transaction
(primarily trade receivables and payables) are translated at exchange rates in eÅect at the balance sheet date
or upon settlement of the transaction. Gains and losses from such translation are recorded to the consolidated
statements of operations as a component of ""other income, net.''
Income taxes Ì The Company follows the asset and liability method of accounting for income taxes.
Deferred tax assets and liabilities are recognized for the estimated future tax impact of diÅerences between the
Ñnancial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates in eÅect for the year in which those temporary diÅerences
are expected to be recovered or settled. The eÅect on deferred tax assets and liabilities of a change in tax rates
is recognized in earnings in the period in which the new rate is enacted.
No provision for U.S. income taxes has been made for approximately $290,740,000 of cumulative
unremitted earnings of foreign subsidiaries at June 27, 2003 because those earnings are expected to be
permanently reinvested outside the U.S.
Self-insurance Ì The Company is primarily self-insured for workers' compensation, and general, product
and automobile liability costs; however, the Company also has a stop-loss insurance policy in place to limit the
Company's exposure to individual and aggregate claims made. Liabilities for these programs are estimated
based upon outstanding claims and claims estimated to have been incurred but not yet reported based upon
historical loss experience. These estimates are subject to variability due to changes in trends of losses for
outstanding claims and incurred but not recorded claims, including external factors such as future inÖation
rates, beneÑt level changes and claim settlement patterns.
Revenue recognition Ì Revenue from product sales is recognized when persuasive evidence of an
arrangement exists, delivery has occurred or services have been rendered, the sales price is Ñxed or
determinable and collectibility is reasonably assured. Generally, these criteria are met upon shipment to
customers. Most of the Company's product sales come from product Avnet purchases from a supplier and
holds in inventory. A portion of the Company's sales are shipments of product directly from its suppliers to its
customers. In such circumstances, Avnet negotiates the price with the customer, pays the supplier directly for
the product shipped and bears credit risk of collecting payment from its customers. Furthermore, in such drop-
shipment arrangements, Avnet bears responsibility for accepting returns of product from the customer even if
Avnet, in turn, has a right to return the product to the original supplier if the product is defective. Under these
terms, the Company serves as the principal with the customer, as deÑned under SEC StaÅ Accounting
Bulletin No. 101 and Emerging Issues Task Force Issue No. 99-19 (""EITF 99-19''), Reporting Revenue
Gross as a Principal versus Net as an Agent,'' and therefore recognizes the sale and cost of sale of the product
upon receiving notiÑcation from the supplier that the product has shipped.
In addition, the Company has more limited contractual relationships with certain of its customers and
suppliers whereby Avnet assumes an agency relationship in the transaction as deÑned by EITF 99-19. In such
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