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F-8
CALLAWAY GOLF COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The Company
Callaway Golf Company (“Callaway Golf” or the “Company”), a Delaware corporation, together with its subsidiaries,
designs, manufactures and sells high quality golf clubs (drivers, fairway woods, hybrids, irons, wedges and putters), golf balls,
golf bags and other golf-related accessories. The Company generally sells its products to golf retailers (including pro shops
at golf courses and off-course retailers), sporting goods retailers and mass merchants, directly and through its wholly-owned
subsidiaries, and to third-party distributors in the United States and in over 100 countries around the world. The Company
also sells pre-owned Callaway Golf products through its website www.callawaygolfpreowned.com and sells new Callaway
Golf products through its websites www.callawaygolf.com and www.odysseygolf.com. In addition, the Company licenses its
trademarks and service marks in exchange for a royalty fee to third parties for use on golf related accessories including golf
apparel and footwear, golf gloves, umbrellas, prescription eyewear and practice aids.
Note 2. Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its domestic and
foreign subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that
are believed to be reasonable under the circumstances. Examples of such estimates include provisions for warranty,
uncollectible accounts receivable, inventory obsolescence, sales returns, tax contingencies, estimates on the valuation of share-
based awards and recoverability of long-lived assets and investments. Actual results may materially differ from these estimates.
On an ongoing basis, the Company reviews its estimates to ensure that these estimates appropriately reflect changes in its
business or as new information becomes available.
Recent Accounting Standards
In August 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")
No. 2014-15, "Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about
an Entity’s Ability to Continue as a Going Concern." This ASU is intended to define management’s responsibility to evaluate
whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote
disclosures, and provides guidance to an organization’s management, with principles and definitions that are intended to reduce
diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement
footnotes. Until the issuance of this ASU, U.S. GAAP lacked guidance about management’s responsibility to evaluate whether
there is substantial doubt about the organization’s ability to continue as a going concern or to provide related footnote
disclosures. The amendments are effective for annual periods ending after December 15, 2016, and interim periods within
annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for
which the financial statements have not previously been issued. The Company does not expect that the adoption of this
amendment will have a material impact on its consolidated financial statements and disclosures.
In June 2014, the FASB issued ASU No. 2014-12, "Compensation - Stock Compensation (Topic 718): Accounting for
Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite
Service Period." This ASU requires that a performance target that affects vesting and that could be achieved after the requisite
service period, be treated as a performance condition. The performance target should not be reflected in estimating the grant-
date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the
performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the
requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of
the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the