Avnet 2008 Annual Report Download - page 49

Table of Contents
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Principles of consolidation — The accompanying consolidated financial statements include the accounts of the
Company and all of its majority-owned and controlled subsidiaries. All intercompany accounts and transactions have
been eliminated.
During fiscal 2007, the Company reviewed its method of recording revenue related to sales of supplier service
contracts and now classifies such contracts on a net revenue basis. See Revenue Recognition
in this Note 1 for further
discussion.
Cash and cash equivalents —
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
Inventories — Inventories, comprised principally of finished goods, are stated at cost (first-in, first-out) or
market, whichever is lower.
Investments — 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 financial
statements. Minority interests in the years presented, of which amounts are not material, are included in the caption
“accrued expenses and other” in the accompanying consolidated balance sheets. Investments in joint ventures and
entities in which the Company exercises significant influence but not control are accounted for using the equity
method. 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 significant influence. 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
historical performance of the ventures, the ventures’ forecasted financial 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. Thus, the carrying value of the Company’s
investments approximates fair value.
Depreciation and amortization — 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 — 30 years; machinery, fixtures and equipment — 2-10 years; and leasehold
improvements — over the applicable remaining lease term or useful life if shorter.
Long-lived assets — 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. An impairment is recognized
when the estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition
is less than its carrying amount. An impairment is measured as the amount by which an asset’s net book value
exceeds its estimated fair value. 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 — Goodwill represents the excess of the purchase price over the fair value of net assets acquired. In
accordance with the Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards
No. 142 (
“SFAS 142”), Goodwill and Other Intangible Assets, the Company does not amortize goodwill. Instead,
annual tests for goodwill impairment are performed by applying a fair-value based test to Avnet’s reporting units,
defined as each of the three regional businesses, which are the Americas, EMEA (Europe, Middle East and Africa),
and Asia, within each of the Company’s operating groups. The Company conducts its periodic test for goodwill
impairment annually, on the first day of the fiscal fourth quarter. A two-step process is used to evaluate goodwill for
impairment. The first step is to determine if there is an indication of impairment by comparing the estimated fair
value of each reporting unit to its carrying value including existing goodwill. Goodwill is considered impaired if the
carrying value of a reporting unit exceeds the estimated fair value. The second step, which is performed only if there
is an indication of impairment, determines the amount of the impairment by comparing the
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1.
Summary of significant accounting policies