Memorex 2007 Annual Report Download - page 68

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Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Imation Corp.:
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations,
shareholders’ equity and comprehensive income (loss) and of cash flows present fairly, in all material respects, the financial
position of Imation Corp. and its subsidiaries at December 31, 2007 and 2006, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2007 in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal
Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility
is to express opinions on these financial statements and on the Company’s internal control over financial reporting based
on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement and whether effective internal control
over financial reporting was maintained in all material respects. Our audits of the financial statements included examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the overall financial statement presentation.
Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as
we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
As discussed in Note 2 to the consolidated financial statements, in 2007 the Company changed the manner in which
it accounts for income taxes as a result of adopting the provisions of FASB Interpretation No. 48 (FIN 48), Accounting for
Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109. As discussed in Note 2 to the consolidated
financial statements, in 2006, the Company changed the manner in which it accounts for share-based compensation as a
result of adopting the provisions of Statement of Financial Accounting Standard No. 123 (Revised 2004), Share-Based
Payment. As discussed in Note 11 to the consolidated financial statements, in 2006, the Company changed the manner in
which it accounts for defined benefit pension plans as a result of adopting the provisions of Statement of Financial
Accounting Standard No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
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