Avnet 2014 Annual Report Download - page 48

Table of Contents AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies
Principles of consolidation —
The accompanying consolidated financial statements include the accounts of Avnet, Inc. and all of its
majority-owned and controlled subsidiaries (the "Company" or "Avnet"). All intercompany accounts and transactions have been eliminated.
Reclassifications — Certain prior period amounts have been reclassified to conform to the current-period presentation.
Fiscal year — The Company operates on a “52/53 week” fiscal year, which ends on the Saturday closest to June 30th. Fiscal 2014 , 2013
,
and 2012 all contained 52 weeks. Unless otherwise noted, all references to “fiscal 2014 ” or any other “year” shall mean the Company’
s fiscal
year.
Management estimates —
The preparation of financial statements in conformity with generally accepted accounting principles in the
United States ("GAAP") requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the
reporting period. Actual results could differ materially from those estimates.
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. The
Company regularly reviews the cost of inventory against its estimated market value, considering any rights of return or price protection provided
by the Company’s suppliers, and records a lower of cost or market write-
down if any inventories have a cost in excess of their estimated market
value.
Investments — Investments in joint ventures and entities ("ventures") in which the Company has an ownership interest of
greater than 50%
and exercises control over the ventures are consolidated in the accompanying consolidated financial statements. Non-
controlling interests in the
years presented are not material and, as a result, are included in the caption
“accrued expenses and other”
in the accompanying consolidated
balance sheets. Investments in ventures in which the Company exercises significant influence but not control are accounted for using the equity
method. Investments in ventures in which the Company’s ownership interest is less than 20%
and over which the Company does not exercise
significant influence are accounted for using the cost method. The Company monitors ventures for events or circumstances that indicate that the
fair value of a venture is less than its carrying value, in which case the Company would further review the venture to determine if it is other-than-
temporarily impaired. During fiscal 2014, 2013 and 2012 the Company did not have any material investments in ventures.
Depreciation , amortization and useful lives —
The Company reports property, plant and equipment at cost, less accumulated depreciation.
Cost includes the price paid to acquire or construct the assets, required installation costs, interest capitalized during the construction period, and
any expenditure that substantially adds to the value of or substantially extends the useful life of an existing asset. Additionally, the Company
capitalizes qualified costs related to software obtained or developed for internal use. Software obtained for internal use has generally been
enterprise-level business and finance software that is customized to meet the Company’
s specific operational requirements. The Company begins
depreciation and amortization ("depreciation") for property, plant and equipment when an asset is both in the location and condition for its
intended use.
Depreciation of property, plant, and equipment is generally provided for by the straight-
line method over the estimated useful lives of the
long-lived assets. The estimated useful lives for property, plant, and equipment are typically as follows: buildings — 30
years; machinery,
fixtures and equipment — 2 - 10 years; information technology hardware and software — 2 - 10 years; and leasehold improvements —
over the
applicable remaining lease term or useful life if shorter .
The Company amortizes intangible assets acquired in business combinations using the straight-
line method over the estimated economic
lives of the intangible assets from the date of acquisition, which is generally between 2 - 10 years.
Long-lived assets impairment — Long-
lived assets, including property, plant and equipment and intangible assets, are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. An
impairment is recognized when the estimated undiscounted cash flows expected to result from the use of the asset group and its eventual
disposition is less than its carrying amount. An impairment is measured as the amount by which
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