(1)	SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

The Company

Gentex Corporation designs, develops, manufactures and markets proprietary electro-optical products: automatic-dimming rearview mirrors and camera-based lighting-assist features for the global automotive industry, non-automatic-dimming rearview automotive mirrors with electronic features, fire protection products for the commercial building industry and variable dimmable windows for the aircraft industry. A substantial portion of the Company's net sales and accounts receivable result from transactions with domestic and foreign automotive manufacturers and Tier 1 suppliers. The Company's fire protection products are primarily sold to domestic distributors and original equipment manufacturers of fire and security systems. The Company does not require collateral or other security for trade accounts receivable.

Significant accounting policies of the Company not described elsewhere are as follows:

Consolidation

The consolidated financial statements include the accounts of Gentex Corporation and all of its wholly-owned subsidiaries (together the "Company"). All significant intercompany accounts and transactions have been eliminated.

Cash Equivalents

Cash equivalents consist of funds invested in bank accounts and money market funds that have daily liquidity.

Allowance For Doubtful Accounts

The Company bases its allowances for doubtful accounts related to receivables on historical credit and collections experience, and the specific identification of other potential problems, including the economic climate. Actual collections can differ, requiring adjustments to the allowances. Individual accounts receivable balances are evaluated on a monthly basis, and those balances considered uncollectible are charged to the allowance. Collections of amounts previously written off are recorded as an increase to the allowance.

The following table presents the activity in the Company's allowance for doubtful accounts:

		September 30,		September 30,			September 30,			September 30,
	Beginning Balance		Net Additions/ (Reductions) to Costs and Expenses			Deductions* and Other Adjustments			Ending Balance
Year Ended December 31, 2011:
Allowance for Doubtful Accounts	$	4,300,000	$	(802,929	)	$	(97,071	)	$	3,400,000

Year Ended December 31, 2010:
Allowance for Doubtful Accounts	$	4,500,000	$	(96,236	)	$	(103,764	)	$	4,300,000

*	Represents excess of accounts written off over recoveries and other adjustments.

The Company's overall allowance for doubtful accounts primarily relates to financially distressed Tier 1 automotive customers. The Company continues to work with these financially distressed customers in collecting past due balances.

Investments

The Company follows the provisions of ASC 820, "Fair Value Measurements and Disclosures" for its financial assets and liabilities, and to its non-financial assets and liabilities. ASC 820 provides a framework for measuring the fair value of assets and liabilities. This framework is intended to provide increased consistency in how fair value determinations are made under various existing accounting standards that permit, or in some cases, require estimates of fair-market value. This standard also expanded financial statement disclosure requirements about a Company's use of fair-value measurements, including the effect of such measure on earnings.

The Company's investment securities are classified as available for sale and are stated at fair value based on quoted market prices. Assets or liabilities that have recurring measurements are shown below as of December 31, 2011 and December 31, 2010:

		September 30,		September 30,		September 30,		September 30,
			Fair Value Measurements at Reporting Date Using
	Total as of		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	December 31, 2011		(Level I)		(Level 2)		(Level 3)
Cash & Cash Equivalents	$	357,986,774	$	357,986,774	$	—	$	—
Short-Term Investments:
Government Securities		35,024,030		35,024,030		—		—
U.S. Treasury Notes		25,044,000		—		25,044,000		—
Corporate Bonds		649,204		—		649,204
Other		91,003		91,003		—		—
Long-Term Investments:
Common Stocks		53,554,303		53,554,303		—		—
Mutual Funds – Equity		73,749,772		73,749,772		—		—
Certificate of Deposit		505,390		—		505,390		—
Other – Equity		358,700		358,700		—		—

Total	$	546,963,176	$	520,764,582	$	26,198,594	$	—

		September 30,		September 30,		September 30,		September 30,
			Fair Value Measurements at Reporting Date Using
	Total as of		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	December 31, 2010		(Level I)		(Level 2)		(Level 3)
Cash & Cash Equivalents	$	348,349,773	$	348,349,773	$	—	$	—
Short-Term Investments:
Government Securities		36,136,760		36,136,760		—		—
U.S. Treasury Notes		50,156,250		—		50,156,250		—
Other		154,586		154,586		—		—
Long-Term Investments:
Common Stocks		63,637,711		63,637,711		—		—
Mutual Funds – Equity		55,234,901		55,234,901		—		—
Limited Partnership – Equity		9,363,555		—		9,363,555		—
Certificate of Deposit		500,000		—		500,000		—
Other – Equity		355,000		355,000		—		—

Total	$	563,888,536	$	503,868,731	$	60,019,805	$	—

The Company determines the fair value of its U.S. Treasury Notes by utilizing monthly valuation statements that are provided by its broker. The broker bases the investment valuation by using the bid price in the market. The Company also refers to third party sources to validate valuations. In addition, the Company determines the fair value of its limited partnership equity investments by utilizing monthly valuation statements that are provided by the limited partnership. The limited partnership bases its equity investment valuations on unadjusted quoted prices in active markets. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.

The amortized cost, unrealized gains and losses, and market value of investment securities are shown as of December 31, 2011 and 2010:

		September 30,		September 30,		September 30,			September 30,
	Unrealized
2011	Cost		Gains		Losses			Market Value
Short-Term Investments:
Government Securities	$	35,016,980	$	7,090	$	(40	)	$	35,024,030
U.S. Treasury Notes		25,025,600		18,400		—			25,044,000
Corporate Bonds		648,879		325		—			649,204
Other		91,003		—		—			91,003
Long-Term Investments:
Common Stocks		42,344,526		12,274,640		(1,064,863	)		53,554,303
Mutual Funds-Equity		68,986,676		6,277,183		(1,514,087	)		73,749,772
Certificate of Deposit		505,390		—		—			505,390
Other-Equity		338,506		20,194		—			358,700

Total	$	172,957,560	$	18,597,832	$	(2,578,990	)	$	188,976,402

		September 30,		September 30,		September 30,			September 30,
	Unrealized
2010	Cost		Gains		Losses			Market Value
Short-Term Investments:
Government Securities	$	36,137,467	$	9,254	$	(9,961	)	$	36,136,760
U.S. Treasury Notes		50,095,921		60,329		—			50,156,250
Other		154,586		—		—			154,586
Long-Term Investments:
Common Stocks		44,899,944		18,819,518		(81,751	)		63,637,711
Mutual Funds-Equity		42,106,776		13,128,125		—			55,234,901
Limited Partnership-Equity		7,844,022		1,519,533		—			9,363,555
Certificate of Deposit		500,000		—		—			500,000
Other-Equity		338,506		16,494		—			355,000

Total	$	182,077,222	$	33,553,253	$	(91,712	)	$	215,538,763

Unrealized losses on investments as of December 31, 2011 (excluding other-than-temporary impairments), are as follows:

		September 30,		September 30,
	Aggregate Unrealized Losses		Aggregate Fair Value
Less than one year	$	2,578,990	$	42,845,635
Greater than one year		—		—

Unrealized losses on investments as of December 31, 2010 (excluding other-than-temporary impairments), are as follows:

		September 30,		September 30,
	Aggregate Unrealized Losses		Aggregate Fair Value
Less than one year	$	91,712	$	17,007,886
Greater than one year		—		—

ASC 320, "Accounting for Certain Investments in Debt and Equity Securities," as amended and interpreted, provides guidance on determining when an investment is other-than-temporarily impaired. The Company reviews its fixed income and equity investment portfolio for any unrealized losses that would be deemed other-than-temporary and require the recognition of an impairment loss in income. If the cost of an investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, the duration and extent to which the fair value is less than cost, and the Company's intent and ability to hold the investments. Management also considers the type of security, related-industry and sector performance, as well as published investments ratings and analyst reports, to evaluate its portfolio. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and new cost basis in the investment is established. If market, industry, and/or investee conditions deteriorate, the Company may incur future impairments. Management considered equity investment losses of $1,290,590 to be other-than-temporary in calendar year 2009; accordingly, the losses were recognized in the consolidated statement of income for the year ended December 31, 2009. No investments were considered to be other-than-temporary impaired in 2010 and 2011.

Fixed income securities as of December 31, 2011, have contractual maturities as follows:

		September 30,
Due within one year	$	60,808,237
Due between one and five years		505,390
Due over five years		—


	$	61,313,627

Fair Value of Financial Instruments

The Company's financial instruments consist of cash and cash equivalents, investments, accounts receivable and accounts payable. The Company's estimate of the fair values of these financial instruments approximates their carrying amounts at December 31, 2011 and 2010.

Inventories

Inventories include material, direct labor and manufacturing overhead and are valued at the lower of first-in, first-out (FIFO) cost or market. Inventories consisted of the following as of December 31, 2011 and 2010.

		September 30,		September 30,
	2011		2010
Raw materials	$	129,796,238	$	62,857,800
Work-in-process		26,367,953		13,055,237
Finished goods		32,589,121		24,815,693


	$	188,753,312	$	100,728,730

Allowances for slow-moving and obsolete inventories were $4,893,000 and $3,997,000 at December 31, 2011 and 2010. The year-over-year increase in the allowance was primarily the result of the increase in raw materials inventory.

Plant and Equipment

Plant and equipment are stated at cost. Depreciation and amortization are computed for financial reporting purposes using the straight-line method, with estimated useful lives of 7 to 40 years for buildings and improvements, and 3 to 10 years for machinery and equipment.

Depreciation expense was approximately $41,572,000, $37,744,000 and $37,866,000 in 2011, 2010 and 2009, respectively.

Impairment of Disposal of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are determined to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Patents

The Company's policy is to capitalize costs incurred to obtain patents. The cost of patents is amortized over their useful lives. The cost of patents in process is not amortized until issuance. Accumulated amortization was approximately $4,630,000 and $3,597,000 at December 31, 2011 and 2010, respectively. At December 31, 2011, patents had a weighted average amortization life of 8 years. Patent amortization expense was approximately $1,063,000, $877,000, and $498,000 in 2011, 2010 and 2009, respectively. For each of the next five years, patent amortization expense will approximate $1,100,000 annually.

Revenue Recognition

The Company's revenue is generated from sales of its products. Sales are recognized when the product is shipped and legal title has passed to the customer. The Company does not generate sales from arrangements with multiple deliverables.

Advertising and Promotional Materials

All advertising and promotional costs are expensed as incurred and amounted to approximately $1,179,000, $922,000 and $1,308,000, in 2011, 2010 and 2009, respectively.

Repairs and Maintenance

Major renewals and improvements of property and equipment are capitalized, and repairs and maintenance are expensed as incurred. The Company incurred expenses relating to the repair and maintenance of plant and equipment of approximately $11,520,000, $8,315,000 and $5,992,000, in 2011, 2010 and 2009, respectively.

Self-Insurance

The Company is self-insured for a portion of its risk on workers' compensation and employee medical costs. The arrangements provide for stop loss insurance to manage the Company's risk. Operations are charged with the cost of claims reported and an estimate of claims incurred but not reported based upon historical claims lag information and other data.

Product Warranty

The Company periodically incurs product warranty costs. Any liabilities associated with product warranty are estimated based on known facts and circumstances and are not significant at December 31, 2011 and 2010. The Company does not offer extended warranties on its products.

Income Taxes

The provision for income taxes is based on the earnings reported in the consolidated financial statements. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future. Such deferred income tax asset and liability computations are based on enacted tax laws and rates.

Earnings Per Share

The following table reconciles the numerators and denominators used in the calculations of basic and diluted earnings per share (EPS) for each of the last three years:

		September 30,		September 30,		September 30,
	2011		2010		2009
Numerators:
Numerator for both basic and diluted EPS, net income	$	164,668,228	$	137,733,969	$	64,637,085

Denominators:
Denominator for basic EPS, weighted-average common shares outstanding		142,492,699		139,356,831		137,227,677
Potentially dilutive shares resulting from stock option plans		1,784,109		1,378,936		417,673

Denominator for diluted EPS		144,276,808		140,735,767		137,645,350

For the years ended December 31, 2011, 2010 and 2009, 1,253,824, 279,333 and 8,169,888 shares, respectively, related to stock option plans were not included in diluted average common shares outstanding because their effect would be antidilutive.

Other Comprehensive Income (Loss)

Comprehensive income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. For the Company, comprehensive income represents net income adjusted for unrealized gains and losses on certain investments and foreign currency translation adjustments.

Foreign Currency Translation

The financial position and results of operations of the Company's foreign subsidiaries are measured using the local currency as the functional currency. Assets and liabilities are translated at the exchange rate in effect at year-end. Income statement accounts are translated at the average rate of exchange in effect during the year. The resulting translation adjustment is recorded as a separate component of shareholders' investment. Gains and losses arising from re-measuring foreign currency transactions into the appropriate currency are included in the determination of net income.

Stock-Based Compensation Plans

The Company accounts for stock-based compensation using the fair value recognition provisions of ASC 718, "Share-Based Payment." As described more fully in Note 5, the Company provides compensation benefits under two stock option plans, a restricted plan and an employee stock purchase plan.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

New Accounting Standards

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, "Fair Value Measurement" ("ASU 2011-04"). ASU 2011-04 amends ASC 820 to achieve common fair value measurement and disclosure requirements in U.S. Generally Accepted Accounting Principles (GAAP) and International Financial reporting Standards (IFRS). The amended guidance requires information disclosure regarding transfers between Level 1 and Level 2 of the fair value hierarchy, information disclosure regarding sensitivity of a fair value measurement categorized within Level 3 of the fair value hierarchy to changes in unobservable inputs and any interrelationships between those unobservable inputs, and the categorization by level of the fair value hierarchy for items that are not measured at fair value. The amended guidance is effective for financial periods beginning after December 15, 2011. ASU 2011-04 is not expected to have a material effect on the Company's consolidated financial position or results of operations.

In June 2011, FASB issued Accounting Standards Update No. 2011-05, "Presentation of Comprehensive Income" ("ASU 2011-05"). ASU 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity. Under ASU 2011-05, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single or continuous statement of comprehensive income or in two separate consecutive statements. The amended guidance is effective for financial periods beginning after December 15, 2011. ASU 2011-05 is not expected to have a material effect on the Company's consolidated financial position or results of operations.

In December 2011, FASB issued Accounting Standards Update No. 2011-12, "Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05" ("ASU 2011-12"). ASU 2011-12 defers the effective date of ASU 2011-05 as it pertains to the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. The amended guidance is effective for financial periods beginning after December 15, 2011. ASU 2011-05 is not expected to have a material effect on the Company's consolidated financial position or results of operations.