CDW 2003 Annual Report Download - page 37

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recognized in the reseller’s income statement unless certain conditions are met showing that the funds are used for a
specific program entirely funded by an individual vendor. If these specific requirements related to individual
vendors are met, the consideration is accounted for as a reduction in the related expense category, such as
advertising or selling and administrative expense. EITF 02-16 applies to all agreements modified or entered into on
or after January 1, 2003. As a result of prospectively adopting EITF 02-16, we recorded $62.7 million of vendor
consideration as a reduction of cost of sales during the year ended December 31, 2003. Adopting EITF 02-16 had
no impact on our operating profit, as the $62.7 million of vendor consideration recorded as a reduction of cost of
sales would previously have been recorded as a reduction of advertising expense ($60.9 million) and selling and
administrative expense ($1.8 million).
In November 2002, the EITF published Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables”
(“EITF 00-21”), which addresses certain aspects of the accounting by a vendor for arrangements under which it will
perform multiple revenue-generating activities. EITF 00-21 addresses how to determine whether an arrangement
involving multiple deliverables contains more than one unit of accounting. EITF 00-21 was effective for the
Company for revenue arrangements entered into beginning July 1, 2003. The adoption of EITF 00-21 had no
impact on our 2003 consolidated financial statements.
In January 2003, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 46,
“Consolidation of Variable Interest Entities, an interpretation of ARB 51” (“FIN 46”). In December 2003, the
FASB issued a revised version of FIN 46, FASB Interpretation No. 46 (revised December 2003), “Consolidation of
Variable Interest Entities, an interpretation of ARB 51” (“FIN 46R”), to clarify some of the provisions of FIN 46
and to exempt certain entities from its requirements. FIN 46R requires that the assets, liabilities and results of the
activity of variable interest entities be consolidated into the financial statements of the company that has the
controlling financial interest. FIN 46R also provides the framework for determining whether a variable interest
entity should be consolidated based on voting interests or significant financial support provided to it. FIN 46R was
effective for the Company on February 1, 2003 for variable interest entities created after January 31, 2003. For
variable interest entities or potential variable interest entities commonly referred to as special-purpose entities
created prior to February 1, 2003, the FASB deferred the implementation date of FIN 46R to the period ending after
December 15, 2003. For potential variable interest entities that are not special-purpose entities, FIN 46R is
effective for the period ending after March 15, 2004. In accordance with FIN 46R, the assets and liabilities of
CDW-L were consolidated into our balance sheet as of December 31, 2003, and we recorded a minority interest for
our partner’s 50% interest in CDW-L. We consolidated approximately $7.8 million and $3.4 million of assets and
liabilities, respectively, from CDW-L that are classified primarily as miscellaneous receivables and accrued
expenses. Beginning on December 31, 2003, we will consolidate the future results of operations of CDW-L into
our statement of income and record a minority interest for our partner’s 50% interest in CDW-L.
In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, “Accounting for
Certain Financial Instruments with the Characteristics of Both Liabilities and Equity” (“SFAS 150”). SFAS 150
requires that certain financial instruments, which under previous guidance were accounted for as equity, must
now be accounted for as liabilities. The financial instruments affected include mandatory redeemable stock,
certain financial instruments that require or may require the issuer to buy back some of its shares in exchange for
cash or other assets and certain obligations that can be settled with shares of stock. SFAS 150 is effective for all
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. The adoption of SFAS 150 had no impact on our 2003
consolidated financial statements.
Any statements in this report that are forward-looking (that is, not historical in nature) are made pursuant
to the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. Such forward-looking
statements include, for example, statements concerning the Company’s sales growth, gross profit as a
percentage of sales, advertising expense and cooperative advertising reimbursements. In addition, words such
as “likely,” “may,” “would,” “could,” “should,” “anticipate,” “believe,” “estimate,” “expect,” “intend,”
“plan,” and similar expressions, may identify forward-looking statements in this report. Forward-looking
statements in this report are based on the Company’s beliefs and expectations as of the date of this report and
are subject to risks and uncertainties, including those outlined in detail in this report in Item 1 - Business under
the heading “Certain Factors Affecting CDW’s Business” and other factors identified from time to time in the