Columbia Sportswear 2011 Annual Report Download - page 56

COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
that the tax position will be sustained on examination by the relevant taxing authority based on the technical
merits of the position. The tax benefits recognized in the financial statements from such positions are then
measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate
settlement with the relevant tax authority. In making this determination, the Company assumes that the taxing
authority will examine the position and that they will have full knowledge of all relevant information. The
provision for income taxes also includes estimates of interest and penalties related to uncertain tax positions.
Derivatives:
The effective portion of changes in fair values of outstanding cash flow hedges is recorded in other
comprehensive income until earnings are affected by the hedged transaction, and any ineffective portion is
included in current income. In most cases amounts recorded in other comprehensive income will be released to
earnings some time after maturity of the related derivative. The Consolidated Statements of Operations
classification of effective hedge results is the same as that of the underlying exposure. Results of hedges of
product costs are recorded in cost of sales when the underlying hedged transaction affects earnings. Unrealized
derivative gains and losses, which are recorded in assets and liabilities, respectively, are non-cash items and
therefore are taken into account in the preparation of the Consolidated Statements of Cash Flows based on their
respective balance sheet classifications. See Note 19 for more information on derivatives and risk management.
Foreign currency translation:
The assets and liabilities of the Company’s foreign subsidiaries have been translated into U.S. dollars using
the exchange rates in effect at period end, and the net sales and expenses have been translated into U.S. dollars
using average exchange rates in effect during the period. The foreign currency translation adjustments are
included as a separate component of accumulated other comprehensive income in shareholders’ equity and are
not currently adjusted for income taxes when they relate to indefinite net investments in non-U.S. operations.
Revenue recognition:
The Company records wholesale, e-commerce and licensed product revenues when title passes and the risks
and rewards of ownership have passed to the customer. Title generally passes upon shipment to, or upon receipt
by, the customer depending on the terms of sale with the customer. Retail store revenues are recorded at the time
of sale.
In some countries outside of the United States where title passes upon receipt by the customer,
predominantly in the Company’s Western European wholesale business, precise information regarding the date
of receipt by the customer is not readily available. In these cases, the Company estimates the date of receipt by
the customer based on historical and expected delivery times by geographic location. The Company periodically
tests the accuracy of these estimates based on actual transactions. Delivery times vary by geographic location,
generally from one to five days. To date, the Company has found these estimates to be materially accurate.
At the time of revenue recognition, the Company also provides for estimated sales returns and
miscellaneous claims from customers as reductions to revenues. The estimates are based on historical rates of
product returns and claims as well as events and circumstances that indicate changes to historical rates of returns
and claims. However, actual returns and claims in any future period are inherently uncertain and thus may differ
from the estimates. If actual or expected future returns and claims are significantly greater or lower than the
reserves that had been established, the Company would record a reduction or increase to net revenues in the
period in which it made such determination.
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