Change in Accounting Principle

9 Months Ended

Sep. 30, 2011

(2) Change in Accounting Principle

Effective January 1, 2011, the Company elected to change the method of valuing inventories for certain U.S. businesses to the first-in, first-out (“FIFO”) method, while in prior years, these inventories were valued using the last-in, first-out (“LIFO”) method. As a result of this change in accounting principle, all inventories are valued using the FIFO method. The Company believes the change is preferable as it conforms the Company’s inventory costing methods for all inventories to a single method and improves comparability with industry peers. The FIFO method also better reflects current acquisition cost of those inventories on the condensed consolidated balance sheets. The Company has applied this change in method of inventory costing retrospectively to all prior periods presented herein in accordance with accounting principles relating to accounting changes. The effect of retrospectively applying the change on the Company’s inventory costing method increased the inventory balance and reduced the accumulated deficit balance by $2,410 as of January 1, 2010. There were no tax effects for the adjustments for any periods presented below due to the fact that the Company has a full valuation allowance recorded against its U.S. deferred tax assets.

Presented below are the effects of the change in accounting principle for inventory costs on the condensed consolidated financial statements for 2011 and 2010.

Condensed Consolidated Statements of Operations:

Three months ended September 30	2011							2010

	Computed		Impact of			Reported				Impact of
	under		change			under		Originally		change			As
	LIFO		to FIFO			FIFO		reported		to FIFO			adjusted

Cost of goods sold	$	158,320	$	93		$	158,413	$	124,406	$	(568	)	$	123,838
Operating income	$	7,090	$	(93	)	$	6,997	$	5,019	$	568		$	5,587
Income before income taxes	$	5,893	$	(93	)	$	5,800	$	2,624	$	568		$	3,192
Net income	$	4,350	$	(93	)	$	4,257	$	649	$	568		$	1,217
Net income attributable to Stoneridge, Inc. and subsidiaries	$	4,622	$	(93	)	$	4,529	$	684	$	568		$	1,252
Basic net income per share	$	0.19	$	0.00		$	0.19	$	0.03	$	0.02		$	0.05
Diluted net income per share	$	0.18	$	0.00		$	0.18	$	0.03	$	0.02		$	0.05

Nine months ended September 30	2011							2010

	Computed		Impact of			Reported				Impact of
	under		change			under		Originally		change			As
	LIFO		to FIFO			FIFO		reported		to FIFO			adjusted

Cost of goods sold	$	466,500	$	(1,634	)	$	464,866	$	365,595	$	(617	)	$	364,978
Operating income	$	19,476	$	1,634		$	21,110	$	17,151	$	617		$	17,768
Income before income taxes	$	11,915	$	1,634		$	13,549	$	7,521	$	617		$	8,138
Net income	$	8,537	$	1,634		$	10,171	$	6,304	$	617		$	6,921
Net income attributable to Stoneridge, Inc. and subsidiaries	$	9,148	$	1,634		$	10,782	$	6,383	$	617		$	7,000
Basic net income per share	$	0.38	$	0.07		$	0.45	$	0.27	$	0.02		$	0.29
Diluted net income per share	$	0.37	$	0.07		$	0.44	$	0.26	$	0.03		$	0.29

Condensed Consolidated Balance Sheets:


	September 30, 2011								December 31, 2010

	Computed			Impact of		Reported						Impact of
	under			change		under			Originally			change		As
	LIFO			to FIFO		FIFO			reported			to FIFO		adjusted

Inventories, net	$	67,465		$	4,764	$	72,229		$	51,828		$	3,131	$	54,959
Total current assets	$	263,396		$	4,764	$	268,160		$	246,845		$	3,131	$	249,976
Total assets	$	408,598		$	4,764	$	413,362		$	383,605		$	3,131	$	386,736
Accumulated deficit	$	(71,602	)	$	4,764	$	(66,838	)	$	(80,751	)	$	3,131	$	(77,620	)
Total Stoneridge, Inc. and subsidiaries shareholders' equity	$	79,233		$	4,764	$	83,997		$	83,780		$	3,131	$	86,911
Total shareholders' equity	$	83,326		$	4,764	$	88,090		$	88,088		$	3,131	$	91,219
Total liabilities and shareholders' equity	$	408,598		$	4,764	$	413,362		$	383,605		$	3,131	$	386,736

Condensed Consolidated Statements of Cash Flows:

Nine months ended September 30	2011									2010

	Computed			Impact of			Reported						Impact of
	under			change			under			Originally			change			As
	LIFO			to FIFO			FIFO			reported			to FIFO			adjusted

Net income	$	8,537		$	1,634		$	10,171		$	6,304		$	617		$	6,921
Change in inventories, net	$	(15,909	)	$	(1,634	)	$	(17,543	)	$	(11,024	)	$	(617	)	$	(11,641	)

- Definition

The entire disclosure for reporting accounting changes and error corrections. It includes the conveyance of information necessary for a user of the Company's financial information to understand all aspects and required disclosure information concerning all changes and error corrections reported in the Company's financial statements for the period.

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