AutoNation 2000 Annual Report Download - page 51

the termination. Amounts receivable or payable under the agreements are
included in receivables or accrued liabilities in the accompanying Consolidated
Balance Sheets and were not material at December 31, 2000 or 1999.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). In June 1999, the FASB issued
Statement No. 137, "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133." In
June 2000, the FASB issued Statement 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities, an amendment of FASB Statement No.
133." SFAS 133, as amended, establishes accounting and reporting standards
requiring that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. SFAS 133 requires that
changes in the derivative instrument's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative instrument's gains and losses to
offset related results on the hedged item in the income statement, to the
extent effective, and requires that a company must formally document,
designate, and assess the effectiveness of transactions that receive hedge
accounting.
If SFAS 133 had to be applied to all derivative contracts in place on
December 31, 2000, including those embedded in other contracts, total assets
and total liabilities would have increased by approximately $14.3 million. The
Company does not expect there to be a material cumulative effect in earnings or
other comprehensive income from adoption of SFAS 133 as of January 1, 2001.
By requiring the use of fair value accounting, adoption of SFAS 133 could
cause increased volatility in earnings of future periods.
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AUTONATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
Advertising
The Company expenses the cost of advertising as incurred or when such
advertising initially takes place. At December 31, 2000, the Company had
approximately $15.0 million of prepaid advertising costs associated with the
sale of the Company's former outdoor media business as discussed in Note 2,
Business Acquisitions and Divestitures. No advertising costs were capitalized
at December 31, 1999. Advertising expense was $186.5 million, $212.2 million
and $158.0 million for the years ended December 31, 2000, 1999 and 1998,
respectively.
Statements of Cash Flows
The Company considers all highly liquid investments with purchased
maturities of three months or less to be cash equivalents unless the
investments are legally or contractually restricted for more than three months.
The effect of non-cash transactions related to business combinations, as
discussed in Note 2, Business Acquisitions and Divestitures, and other non-cash
transactions are excluded from the accompanying Consolidated Statements of Cash
Flows.