Avnet 2007 Annual Report Download - page 32

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The Company does not consider revenue recognition to be a critical accounting policy due to the nature of its
business in which revenues are generally recognized when persuasive evidence of an arrangement exists, delivery
has occurred or services have been rendered, the sales price is fixed or determinable and collectibility 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 in income over the life of the
agreement, are not material to the consolidated results of operations of the Company.
Recently Issued Accounting Pronouncements
In December 2006, the FASB issued Staff Position No. EITF 00-19-2, Accounting for Registration Payment
Arrangements (“FSP EITF 00-19-2”). FSP EITF 00-19-2 specifics that the contingent obligation to make future
payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a
separate arrangement or included as a provision of a financial instrument or other arrangement, should be separately
recognized and measured in accordance with FASB Statement No. 5, Accounting for Contingencies. FSP
EITF 00-19-2 also requires additional disclosure regarding the nature of any registration payment arrangements,
alternative settlement methods, the maximum potential amount of consideration and the current carrying amount of
the liability, if any. FSP EITF 00-19-2 is effective beginning fiscal 2008. The adoption of FSP EITF 00-19-2 will not
have a material effect on the Company’s consolidated financial statements.
In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108,
Considering the Effects of Prior Year Misstatements when Quantifying Current Year Misstatements (“SAB 108”).
SAB 108 requires analysis of misstatements using both an income statement (rollover) approach and a balance sheet
(iron curtain) approach in assessing materiality and provides for a one-time cumulative effect transition adjustment.
SAB 108 is effective for fiscal year end 2007. The adoption of SAB 108 did not have a material impact on the
Company’s consolidated financial statements.
In September 2006, the FASB issued Statement of Financial Accounting Standard (“SFAS”) No. 158,
Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (“SFAS 158”). SFAS 158
requires the recognition in the balance sheet of the overfunded or underfunded positions of defined benefit pension
and other postretirement plans, along with a corresponding non-cash after-tax adjustment to stockholders’ equity.
SFAS 158 is effective for fiscal year end 2007. Other than enhanced disclosure, the adoption of SFAS 158 did not
have a material impact on the Company’s consolidated financial statements. See Note 10 in the notes to the
consolidated financial statements appearing in Item 15 of this Report for further discussion.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”),which defines
fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements,
but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of
the information. SFAS 157 is effective for fiscal year 2009. The Company is evaluating the potential impact on its
consolidated financial statements upon adoption of SFAS 157.
In July 2006, the FASB issued Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income
Taxes — 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. The Company will adopt FIN 48 (as amended by FASB Staff Position No. FIN 48-1, Definition of
Settlement in FASB Interpretation No. 48) beginning fiscal 2008. The adoption of FIN 48 will not have a material
impact on the Company’s consolidated financial statements.
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