CDW 2003 Annual Report Download - page 50

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Fair Value of Financial Instruments
We estimate that the fair market value of all of our financial instruments at December 31, 2003 and 2002
are not materially different from the aggregate carrying value due to the short-term nature of these
instruments.
Treasury Shares
We intend to hold repurchased shares in treasury for general corporate purposes, including issuances under
various employee stock option plans. We account for the treasury shares using the cost method.
Foreign Currency Translation
Our functional currency is the U.S. dollar. The functional currency of our Canadian subsidiary is the local
currency, the Canadian dollar. Assets and liabilities of this subsidiary are translated at the spot rate in
effect at the applicable reporting date and the results of operations are translated at the average exchange
rates in effect during the applicable period. The resulting foreign currency translation adjustment is
recorded as accumulated other comprehensive income, which is reflected as a separate component of
shareholders’ equity.
4. Recently Issued or Newly Adopted Accounting Standards
Emerging Issues Task Force (“EITF”) Issue No. 02-16, “Accounting for Consideration Received from a
Vendor by a Customer (Including a Reseller of the Vendor’s Products)” (“EITF 02-16”) became effective for
the Company on January 1, 2003. EITF 02-16 requires that consideration received from vendors, such as
advertising support funds, be accounted for as a reduction to cost of sales when 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