Summary of Significant Accounting Policies |
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Summary of Significant Accounting Policies [Abstract] | |||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts of CCA and its wholly-owned
subsidiaries (collectively the “Company”). All significant inter-company accounts and
transactions have been eliminated.
Estimates and Assumptions:
The consolidated financial statements include the use of estimates, which management
believes are reasonable. The process of preparing financial statements in conformity
with GAAP requires management to make estimates and assumptions regarding certain types
of assets, liabilities, revenues, and expenses. Such estimates primarily relate to
unsettled transactions and events as of the date of the financial statements.
Accounting estimates and assumptions are those that management considers to be most
critical to the financial statements because they inherently involve significant
judgment and uncertainties. All of these estimates and assumptions reflect
management’s best judgment about current economic and market conditions and their
effects on the information available as of the date of the consolidated financial
statements. Accordingly, upon settlement, actual results may differ from estimated
amounts.
Comprehensive
Income (Loss):
Comprehensive (loss) income includes changes in equity that are excluded from the
consolidated statements of operations and are recorded directly into a separate section
of consolidated statements of comprehensive (loss) income. The Company’s accumulated
other comprehensive income (loss) shown on the consolidated balance sheets consist of
unrealized gains and losses on investment holdings, net of deferred tax expense or
benefit.
Cash and Cash Equivalents:
For purposes of the statement of cash flows, the Company considers all highly liquid
instruments purchased with an original maturity of less than three months to be cash
equivalents.
Short-Term Investments and Marketable Securities:
Short-term investments and marketable securities consist of certificates of deposits,
corporate and government bonds and equity securities. The Company has classified its
investments as Available-for-Sale securities. Accordingly, such investments are
reported at fair market value, with the resultant unrealized gains and losses reported
as a separate component of shareholders’ equity. Fair value for Available-for-Sale
securities is determined by reference to quoted market prices or other relevant
information.
Accounts Receivable:
Accounts receivable consist of trade receivables recorded at original invoice amount,
less an estimated allowance for uncollectible amounts. The accounts receivable balance
is further reduced by allowances for cooperative advertising and reserves for returns
which are anticipated to be taken as credits against the balances as of the balance
sheet date. The allowances and reserves which are anticipated to be deducted from
future invoices are included in accrued liabilities. Trade credit is generally extended
on a short term basis; thus trade receivables do not bear interest, although a finance
charge may be applied to receivables that are past due. Trade receivables are
periodically evaluated for collectability based on past credit history with customers
and their current financial condition. Changes in the estimated collectability of
trade receivables are recorded in the results of operations for the period in which the
estimate is revised. Trade receivables that are deemed uncollectible are offset
against the allowance for uncollectible accounts. The Company generally does not
require collateral for trade receivables.
Inventories:
Inventories are stated at the lower of cost (weighted average) or market. Product
returns are recorded in inventory when they are received at the lower of their original
cost or market, as appropriate. Obsolete inventory is written off and its value is
removed from inventory at the time its obsolescence is determined.
Property and Equipment and Depreciation and Amortization:
Property and equipment are stated at cost. The Company charges to expense repairs and
maintenance items, while major improvements and betterments are capitalized.
When the Company sells or otherwise disposes of property and equipment items, the cost
and related accumulated depreciation are removed from the respective accounts and any
gain or loss is included in earnings.
Depreciation and amortization are provided utilizing the straight-line method over the
following estimated useful lives or lease terms of the assets, whichever is shorter:
Intangible Assets:
Intangible assets, which consist of trademarks and patents, are stated at cost.
Patents are amortized utilizing the straight-line method over a period of 17 years.
Such intangible assets are reviewed for potential impairment on a quarterly basis.
Web Site Costs:
Certain costs incurred in creating the graphics and content of the Company’s web site
have been capitalized in accordance with the Accounting Standards Codification (“ASC”)
Topic 350, “Intangibles — Goodwill and Other”, issued by the Financial Accounting
Standards Board (“FASB”). The Company had determined that these costs would be
amortized over a two-year period. Web site design and conceptual costs are expensed as
incurred.
Financial Instruments:
The carrying value of assets and liabilities considered financial instruments
approximate their respective fair value.
Income Taxes:
Income taxes are accounted for under the asset and liability method. Deferred tax
assets and liabilities are recognized for future tax consequences attributable to the
temporary differences between the carrying amounts of assets and liabilities as
recorded on the Company’s financial statements and the carrying amounts as reflected on
the Company’s income tax return. In addition, the tax effect of charitable
contributions that cannot be deducted in the current period and are carried forward for
future periods are also reflected as deferred tax assets. Deferred tax assets and
liabilities are valued using the tax rates expected to apply in the years in which
those temporary differences are expected to be recovered or settled. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management, it is
more likely than not that some portion, or all of the deferred tax asset will not be
realized.
Tax Credits:
Tax credits, when present, are accounted for using the flow-through method as a
reduction of income taxes in the years utilized.
Earnings Per Common Share:
Basic earnings per share are calculated in accordance with ASC Topic 260, “Earnings Per
Share”, which requires using the average number of shares of common stock outstanding
during the period. Diluted earnings per share is computed on the basis of the average
number of common shares outstanding plus the dilutive effect of any common stock
equivalents using the “treasury stock method”. Common stock equivalents consist of
stock options. Based on the stockholder protection rights agreement discussed in Note
No. 10, there is a potential dilution of earnings per common share if an acquirer
accumulated twenty percent (20%) or more of the outstanding common shares of the
Company.
Revenue Recognition:
The Company recognizes sales upon shipment of merchandise. Net sales comprise gross
revenues less expected returns, trade discounts, customer allowances and various sales
incentives. Although no legal right of return exists between the customer and the
Company, returns are accepted if it is in the best interests of the Company’s
relationship with the customer. The Company, therefore, records a reserve for returns
based on the historical returns as a percentage of sales in the five preceding months,
adjusting for returns that can be put back into inventory, and a specific reserve based
on customer circumstances. Those returns which are anticipated to be taken as credits
against the balances as of the balance sheet date are offset against the accounts
receivable. The reserves which are anticipated to be deducted from future invoices are
included in accrued liabilities.
Sales Incentives:
In accordance with ASC Topic 605-10-S99, “Revenue Recognition”, the Company has
accounted for certain sales incentives offered to customers by charging them directly
to sales as opposed to advertising and promotional expense. These accounting
adjustments under ASC Topic 605-10-S99 do not affect net income.
Advertising Costs:
The Company’s policy for financial reporting is to charge advertising cost to expense
as incurred. Advertising, cooperative and promotional expenses for the three months
ended August 31, 2011 and August 31, 2010 were $1,322,522 and $1,690,455, respectively.
Advertising, cooperative and promotional expenses for the nine months ended August 31,
2011 and August 31, 2010 were $4,771,316 and $5,599,736, respectively.
Shipping Costs:
The Company’s policy for financial reporting purposes is to include shipping costs as
part of selling, general and administrative expenses as incurred. Shipping costs
included for the three months ended August 31, 2011 and
August 31, 2010 were $670,043
and $729,725, respectively. Shipping costs included for the nine months ended August
31, 2011 and 2010 were $2,126,917 and $2,047,045, respectively.
Stock Options:
In December 2004, the FASB issued ASC Topic 718, “Stock Compensation”. ASC Topic 718
requires stock grants to employees to be recognized in the consolidated statements of
operations based on their fair values.
Recent Accounting Pronouncements:
In January 2010, the FASB issued ASU 2010-06, which is an update to Topic 820, “Fair
Value Measurement and Disclosures”. This update establishes further disclosure
requirements regarding transfers in and out of levels 1 and 2, and activity in level 3
fair value measurements. The update also provides clarification as to the level of
disaggregation for each class of assets and liabilities, requires disclosures about
inputs and valuation techniques, and also includes conforming amendments to the
guidance on employers’ disclosures about postretirement benefit plan assets. ASU
2010-06 was effective for all interim and annual reporting periods beginning after
December 15, 2010. ASU 2010-06 did not have a material impact on the Company’s
financial position or results of operation.
In February 2010, the FASB issued ASU 2010-09, which is an update to Topic 855,
“Subsequent Events”. This update clarifies the date through which the Company is
required to evaluate subsequent events. SEC filers will be required to evaluate
subsequent events through the date that the financial statements are issued. ASU
2010-09 was effective
upon issuance, and did not have a material impact on the Company’s financial position
or results of operation.
In December 2010, the FASB issued ASU 2010-28, which is an update to Topic 350,
“Intangibles — Goodwill and Other”. This update provides additional guidance with
regard to performing goodwill impairment testing for reporting units with zero or
negative carrying amounts. ASU 2010-28 was effective for all interim and annual
reporting periods beginning after December 15, 2010. ASU 2010-28 did not have a
material impact on the Company’s financial position or results of operation.
In May 2011, the FASB issued ASU 2011-04, which is an update to Topic 820, “Fair Value
Measurement”. This update establishes common requirements for measuring fair value and
related disclosures in accordance with accounting principles generally accepted in the
United States of America and international financial reporting standards. This
amendment did not require additional fair value measurements. ASU 2011-04 is effective
for all interim and annual reporting periods beginning after December 15, 2011. ASU
2011-04 is not expected to have a material impact on the Company’s financial position
or results of operation.
In June 2011, the FASB issued ASU 2011-05, which is an update to Topic 220,
“Comprehensive Income”. This update eliminates the option of presenting the
components of other comprehensive income as part of the statement of changes in
stockholders’ equity, requires consecutive presentation of the statement of net income
and other comprehensive income and requires reclassification adjustments from other
comprehensive income to net income to be shown on the financial statements. ASU
2011-05 is effective for all interim and annual reporting periods beginning after
December 15, 2011. ASU 2011-05 is not expected to have a material impact on the
Company’s financial position or results of operation.
Management does not believe that any other recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
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