Invacare 2007 Annual Report Download - page 83

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INVACARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other Intangibles—Continued
Other in the segment disclosure. See Investment in Affiliated Company in the Notes to the Consolidated
Financial Statements included in this report below. The company has recorded a material amount of intangibles
as the result of acquisitions which may become impaired if performance assumptions, primarily related to sales
and operating cash flows estimates, made at the time of originally valuing the intangibles are not achieved.
Investment in Affiliated Company
FASB Interpretation No. 46, Consolidation of Variable Interest Entities(FIN 46), which was revised in
December 2003, requires consolidation of an entity if the company is subject to a majority of the risk of loss
from the variable interest entity’s (VIE) activities or entitled to receive a majority of the entity’s residual returns,
or both. A company that consolidates a VIE is known as the primary beneficiary of that entity.
Until the fourth quarter of 2007, the company consolidated NeuroControl, a company whose product is
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 had 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. Based upon that decision, NeuroControl’s directors decided to commence a liquidation
process and cease operations. 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. In the
fourth quarter of 2007, the company recognized a one-time gain of $3,981,000 due to the cancellation of debt
owed by NeuroControl to two third parties. As of December 31, 2007, all operations of NeuroControl had ceased.
Current Liabilities
Accrued expenses as of December 31, 2007 and 2006 consist of the following (in thousands):
2007 2006
Accrued salaries and wages .................................................. $ 41,851 $ 31,970
Accrued taxes other than income taxes, primarily Value Added Taxes ................ 29,721 43,899
Accrued warranty cost ...................................................... 16,616 15,165
Accrued interest ........................................................... 11,926 10,893
Accrued freight ........................................................... 10,036 4,278
Accrued rebates ........................................................... 7,420 8,356
Accrued legal and professional ............................................... 3,927 8,222
Accrued product liability, current portion ....................................... 3,556 3,296
Accrued insurance ......................................................... 2,071 2,258
Accrued severance ......................................................... 1,224 6,457
Accrued derivative liability .................................................. 78 435
Other accrued items, principally trade accruals .................................. 17,532 12,547
$145,958 $147,776
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
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