Avnet 2006 Annual Report Download - page 36

is reasonably assured. Generally, these criteria are met upon the actual shipment of product to the customer.
Accordingly, other than for estimates related to possible returns of products from customers, discounts or
rebates, the recording of revenue does not require significant judgments or estimates. Provisions for returns are
estimated based on historical sales returns, credit memo analysis and other known factors. Provisions are made
for discounts and rebates, which are primarily volume-based, and are generally based on historical trends and
anticipated customer buying patterns. Finally, revenues from maintenance contracts, which are deferred and
recognized to income over the life of the agreement, are not material to the consolidated results of operations
of the Company.
Recently Issued Accounting Pronouncements
In July 2006, the FASB issued Interpretation No. 48 (""FIN 48''), Accounting for Uncertainty in Income
Taxes Ì an interpretation of FASB Statement No. 109 (""SFAS 109''). FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an entity's financial statements in accordance with SFAS 109 and
prescribes that a company should use a more-likely-than-not recognition threshold based on the technical
merits of the tax position taken or expected to be taken. Tax positions that meet the more-likely-than-not
recognition threshold should be measured in order to determine the tax benefit to be recognized in the
financial statements. Additionally, FIN 48 provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning
after December 15, 2006, with early adoption permitted. The Company is currently evaluating the impact of
FIN 48 on its consolidated financial statements, which will be adopted beginning in fiscal 2008.
In March 2006, the FASB issued Emerging Issues Task Force 06-3, How Taxes Collected from
Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That is,
Gross versus Net Presentation) (""EITF 06-03'') that clarifies how a company discloses its recording of taxes
collected that are imposed on revenue producing activities. EITF 06-3 is effective for the first interim
reporting period beginning after December 15, 2006. The Company is evaluating the impact of EITF 06-03 on
its consolidated financial statements, which will be adopted beginning the third quarter of fiscal 2007.
In March 2006, the FASB, issued Statement of Financial Accounting Standard No. 156, Accounting for
Servicing of Financial Assets Ì an Amendment of FASB Statement No. 140 (""SFAS 156''). SFAS 156
provides guidance on the accounting for servicing assets and liabilities when an entity undertakes an obligation
to service a financial asset by entering into a servicing contract. This statement is effective for all transactions
at the beginning of fiscal 2008. The adoption of SFAS 156 is not expected to have a material impact on the
Company's consolidated financial condition or results of operations.
In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial
Instruments Ì an Amendment of FASB Statements No. 133 and 140 (""SFAS 155''). SFAS 155 allows
financial instruments that contain an embedded derivative and that otherwise would require bifurcation to be
accounted for as a whole on a fair value basis, at the holders' election. SFAS 155 also clarifies and amends
certain other provisions of SFAS 133 and SFAS 140. SFAS 155 is effective beginning fiscal 2008. The
adoption of SFAS 155 is not expected to have a material effect on the Company's consolidated financial
statements.
In May 2005, the FASB issued Statement of Financial Accounting Standard No. 154 (""SFAS 154''),
Accounting Changes and Error Corrections. SFAS 154 applies to all voluntary changes in accounting principle
as well as to changes required by an accounting pronouncement that does not include specific transition
provisions. SFAS 154 eliminates the requirement in Accounting Principles Board Opinion No. 20, Accounting
Changes, to include the cumulative effect of changes in accounting principle in the income statement in the
period of change and, instead, requires changes in accounting principle to be retrospectively applied.
Retrospective application requires the new accounting principle to be applied as if the change occurred at the
beginning of the first period presented by modifying periods previously reported, if an estimate of the prior
period impact is practicable and estimable. SFAS 154 is effective for accounting changes and corrections of
errors made in fiscal years beginning after December 15, 2005. The Company does not currently anticipate
any changes in accounting principle other than the adoption of SFAS 123R discussed below, which has its
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