Harman Kardon 2010 Annual Report Download - page 73

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Harman International Industries, Incorporated and Subsidiaries
(Dollars in thousands, except per-share data and unless otherwise indicated)
Note 1 – Summary of Significant Accounting Policies
References to “we,” “us,” “our,” the “Company” and “Harman” refer to Harman International Industries,
Incorporated and its consolidated subsidiaries unless the context specifically indicates otherwise.
Description of Business: We believe we are a worldwide leader in the development, manufacture and
marketing of high-quality, high-fidelity audio products and electronic systems. We have developed, both
internally and through a series of strategic acquisitions, a broad range of product offerings sold under renowned
brand names in our principal markets. We also believe we are a leader in digitally integrated infotainment
systems for the automotive industry. Our AKG, Crown, JBL, Infinity, Harman/Kardon, Lexicon, dbx, Studer,
Soundcraft, Mark Levinson, Selenium and Becker brand names are well-known worldwide for premium quality
and performance. We have built these brands by developing our engineering, manufacturing and marketing
competencies, and have employed these resources to establish our Company as a leader in the markets we serve.
Principles of Consolidation: The consolidated financial statements include the accounts of Harman
International Industries, Incorporated and our controlled subsidiary companies. All significant intercompany
accounts and transactions have been eliminated. Operating results of acquired businesses are included in the
Consolidated Statements of Operations from the date of acquisition.
We consolidate variable interest entities if we are deemed to be the primary beneficiary of the entity.
Operating results for variable interest entities in which we are determined to be the primary beneficiary are
included in the Consolidated Statements of Operations from the date such determination is made.
Reclassifications: Where necessary, information for prior fiscal years has been reclassified to conform to
the fiscal year 2010 financial statement presentation. We have made reclassifications to our consolidated
financial statements in order to present discontinued operations relating to the sale of our QNX business for all
periods presented.
Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting
principles in the United States of America (“GAAP”) requires that we make estimates and assumptions that
affect the reported amount of assets and liabilities, as well as the disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amount of revenues and expenses during the reporting
period. Significant estimates are used for, but not limited to: (i) inventory valuation; (ii) depreciable lives of fixed
assets; (iii) goodwill and other asset impairments; (vi) restructuring and related charges; (v) the evaluation of the
recoverability of pre-production and development contract costs; (vi) warranty liabilities; (vii) allowance for
doubtful accounts; (viii) contingency and litigation reserves; (ix) income tax reserves and valuation allowances;
(x) accounting for business combinations; (xi) sales discounts and sales allowances, (xii) pension, postretirement
and other employee benefits and (xiii) losses on Automotive supply arrangements. Various assumptions go into
the determination of these estimates. The process of determining significant estimates requires consideration of
factors such as historical experience, current and expected economic conditions, and actuarial methods. We
reevaluate these significant factors and make changes and adjustments where facts and circumstances indicate
that changes are necessary. The accounting estimates used in the preparation of our consolidated financial
statements will change as new events occur, as more experience is acquired, as additional information is obtained
and as our operating environment changes. Actual results could differ from those estimates and the differences
could have a material impact on our consolidated financial statements.
Changes in Estimates: In the ordinary course of accounting for items discussed above, we make changes in
estimates as appropriate, and as we become aware of circumstances surrounding those estimates. Such changes and
refinements in estimation methodologies are reflected in reported results of operations in the period in which the
changes are made and, if material, their effects are disclosed in the Notes to the Consolidated Financial Statements.
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