Avnet 2003 Annual Report Download - page 61
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Please find page 61 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
fair value of foreign exchange contracts is classiÑed in the captions ""other current assets'' or ""accrued
expenses and other,'' as applicable, in the accompanying consolidated balance sheets.
The Company has also entered into hedge transactions that convert certain Ñxed rate debt to variable rate
debt, eÅectively hedging the change in fair value of the Ñxed rate debt resulting from Öuctuations in interest
rates. Those fair value hedges and the hedged debt are adjusted to current market values through interest
expense in accordance with SFAS 133, as amended (see Note 7).
The Company does not hedge its investment in its foreign operations nor its Öoating interest rate
exposures. The Company does not enter into derivative Ñnancial instruments for trading or speculative
purposes and monitors the Ñnancial stability and credit standing of its counter parties.
Fiscal year Ì The Company operates on a ""52/53 week'' Ñscal year, which ends on the Friday closest to
June 30th (Saturday closest to June 30th commencing in 2004). Fiscal years 2003, 2002 and 2001 all
contained 52 weeks. Unless otherwise noted, all references to the ""year 2003'' or any other ""year'' shall mean
the Company's Ñscal year.
Management estimates Ì The preparation of Ñnancial statements in conformity with accounting princi-
ples generally accepted in the United States requires management to make estimates and assumptions that
aÅect certain reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the
date of the Ñnancial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could diÅer from those estimates.
ReclassiÑcations Ì Certain reclassiÑcations have been made to the prior years' consolidated Ñnancial
statements and notes thereto to conform to the current year presentation.
New accounting standards Ì 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.''
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