Invacare 2006 Annual Report Download - page 77

Investment in Affiliated Company — Continued
The company consolidates NeuroControl, a development stage company, which is currently pursuing
FDA approval to market a product focused on the treatment of post-stroke shoulder pain in the United States.
Certain of the company’s officers and directors (or their affiliates) have small minority equity ownership positions
in NeuroControl. Based on the provisions of FIN 46 and the company’s analysis, the company determined that it
was the primary beneficiary of this VIE as of January 1, 2005 due to the company board of directors’ approval of
additional funding in 2005. Accordingly, the company consolidated this investment on a prospective basis since
January 1, 2005 and recorded an intangible asset for patented technology of $7,003,000. The other beneficial
interest holders have no recourse against the company.
In the fourth quarter of 2006, the company’s board of directors made a decision to no longer fund the cash
needs of NeuroControl, to commence a liquidation process and cease operations as it was decided that the additional
investment necessary to commercialize the business was not in the best interest of the company. Therefore, funding
of this investment ceased on December 31, 2006. As a result of this decision, the company established a valuation
reserve related to the NeuroControl intangible asset of $5,601,000 to fully reserve against the patented technology
intangible as it was deemed to be impaired.
Current Liabilities
Accrued expenses as of December 31, 2006 and 2005 consist of the following (in thousands):
2006 2005
Accrued taxes other than income taxes, primarily Value Added Taxes ...... $ 43,899 $ 30,955
Accrued salaries and wages ..................................... 31,970 29,681
Accrued warranty cost ......................................... 15,165 15,583
Accrued interest ............................................. 10,893 5,180
Accrued rebates ............................................. 8,356 9,434
Accrued legal and professional .................................. 8,222 6,077
Accrued severance............................................ 6,457 6,153
Accrued freight .............................................. 4,278 4,144
Accrued product liability, current portion ........................... 3,296 2,657
Accrued insurance ............................................ 2,258 2,519
Accrued derivative liability ..................................... 435 2,330
Other accrued items, principally trade accruals ....................... 12,547 15,320
$147,776 $130,033
Accrued rebates relate to several volume incentive programs the company offers its customers. The company
accounts for these rebates as a reduction of revenue when the products are sold in accordance with the guidance in
EITF No. 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the
Vendor’s Products). The company has experienced significant pricing pressure in the U.S. market for standard
products in recent years and has partially reduced prices to our customers in the form of a volume rebate such that
the rebates would typically apply only if customers increased their standard product purchases from the company.
FS-18
INVACARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)