On April 1, 2001, Pioneer-Standard adopted SFAS No. 133, ‘‘Accounting for Derivative Instruments and Hedging Activities’’ as amended by SFAS No. 138, ‘‘Accounting for Certain Derivative Instruments and Certain Hedging Activities.’’ SFAS No. 133 and 138 establish accounting and reporting standards for derivative instru- ments and for hedging activities. They require companies to recognize all derivatives on the balance sheet as assets and liabilities, measured at fair value. The adoption of SFAS No. 133 resulted in a charge to ‘‘Accumulated other comprehensive loss’’ of $0.2 million, net of $0.1 million tax benefit for a change in accounting relating to the Company’s derivative instruments. 

In July 2001, the FASB issued SFAS No. 141, ‘‘Business Combinations.’’ SFAS No. 141 requires all business combinations completed after June 30, 2001 to be accounted for under the purchase method. SFAS No. 141 also establishes, for all business combinations made after June 30, 2001, specific criteria for the recognition of intangible assets separately from goodwill. The Company adopted this Statement effective with its acquisition of Aprisa, Inc. in December 2001. The intangible assets acquired were accounted for under SFAS No. 142, ‘‘Goodwill and Other Intangible Assets,’’ issued by the FASB in July 2001, effective for all acquisitions after June 30, 2001. 

In September 2000, the Emerging Issues Task Force (‘‘EITF’’) reached a consensus on Issue No. 00-10, ‘‘Accounting for Shipping and Handling Fees and Costs,’’ which requires shipping and handling amounts billed to a customer to be classified as revenue. In addition, the EITF’s preference is to classify shipping and handling costs as ‘‘cost of sales.’’ In the fourth quarter of Fiscal 2001, the Company changed its method of reporting to comply with EITF Issue No. 00-10. As a result of this implementation, the Company reclassified these amounts from ‘‘Operating Expenses,’’ where they had previously been shown ‘‘net,’’ into the appropriate revenue and cost of goods sold captions. All prior periods were reclassified for consistency. 

Accounting Standards Not Yet Adopted — In June 2001, the FASB issued SFAS No. 143, ‘‘Accounting for Asset Retirement Obligations,’’ which addresses the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the related asset retirement costs. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recorded in the period incurred and the related asset retirement costs be capitalized as part of the carrying amount of the long-lived asset. The company is required to adopt this Statement in the first quarter of Fiscal 2004. The adoption is not expected to have an impact on the Company’s consolidated financial position and results of operations. 

In November 2002, the EITF reached consensus on Issue No. 02-16, ‘‘Accounting for Consideration Received from a Vendor by a Customer (Including a Reseller of the Vendor’s Products).’’ Cash consideration should generally be considered an adjustment of the prices of the vendor’s products and, therefore, characterized as a reduction of cost of sales when recognized in the reseller’s income statement unless certain conditions apply. There were no new agreements modified or entered into between January 1, 2003 and March 31, 2003. The Company will adopt the provisions of this issue for all agreements modified or entered into on or after April 1, 2003. Pioneer-Standard expects the adoption of this issue will not have a material impact on the Company’s consolidated financial position and results of operations, but believes adoption will result in the reclassification of certain amounts currently classified as a reduction of advertising expense to a reduction of cost of sales on a prospective basis. 

In April 2003, the FASB issued SFAS No. 149, ‘‘Amendment of Statement 133 on Derivative Instruments and Hedging Activities.’’ This statement amends and clarifies financial accounting and reporting for derivative instru- ments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003. The Company has not yet determined what impact, if any, the adoption of this Statement will have on its results of operations or financial position. 

In May 2003, the FASB issued SFAS No. 150, ‘‘Accounting for Certain Financial Instruments with Characteris- tics of both Liabilities and Equity.’’ This Statement establishes standards for how a Company classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that a Company classify certain financial instruments, such as instruments in the form of shares that are mandatorily redeemable, as a liability (or an asset in some circumstances). Many of the instruments were previously classified as equity. This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. It is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of the Statement and still existing at the beginning of the interim period of adoption. Restatement is not permitted. The Company will adopt SFAS No. 150 effective July 1, 2003. The Company has not yet determined what impact the adoption of this Statement will have on its results of operations or financial position. 

Reclassifications — Certain amounts in the prior periods’ Consolidated Financial Statements have been reclassified to conform to the current period’s presentation. 

